Youth restiveness in the Niger Delta region of the country has continued to impact negatively on the economy dragging crude oil output to 1.18 million barrels per day (mbd).
Economic indicators from the Central Bank of Nigeria (CBN) indicate that oil production since beginning of 2008 has been on a steady decline, dropping from 2.21 million barrels early in the year.
According to the reports, daily output which stood at 2.21 million barrels in December 2007 slid to 2.2 mbd in January. By the end of February, it had dropped to 2.05 mbd. In March, production again declined to 2.0 mbd from here it settled at its April level of 1.81 mbd.
With such development, there are fears that Nigeria may not only be far from reaching its 2008 budget estimates of 2.45 mbd, but that production could fall by nearly a third by 2015.
Meanwhile, it is believed that militants� attacks on facilities of oil exploring companies in the region have already contributed in shrinking global crude oil supply; consequently, shooting up oil prices put above $125 per barrel as of Monday apart from crisis in Iran and Iraq.
This is evidenced in the fact that losses on the account of militant attacks on Shell facilities alone dropped output by 169,000 mbd, according to earlier reports.
Apart from incessant attacks, the strike embarked by Exxon Mobil workers, a major player in the production sector, equally contributed to crude oil losses within the period.
At the weekend, President Umaru Yar�Adua had worries that Nigeria could lose its place as the highest oil producer in Africa if the Niger Delta crisis was not immediately stopped.
“Unless oil exploration and production are allowed to go on in an uninterrupted and peaceful atmosphere, the nation may be pushed off her number one position in Africa by Angola ,” the president warned.
Other challenges for oil output or revenue or both include security concerns which translate to oil firms paying more for rigs, personnel and services. This development will further reduce profit margin, according to oil industry sources.
Also, Nigeria�s record for delays in approvals, contract awards mean high cost, and more challenges come in the mould of multiplicity of taxes, such as VAT, NDDC levy, which the sources say will further put pressure on margins.
The push for local content, stakeholders say, is good, but the challenge is that it will initially lead to less enthusiasm.
Industry experts see yet another challenge in the drop in output, saying the drop is coming where it hurts the most — the joint ventures.
Profit sharing contracts, which really brings Nigeria no revenue, experts say, now account for more of Nigeria�s oil output because they are located deep seas, where operations are hardly disrupted.
An oil expert puts it succinctly: “No wonder there is now the realistic talk that Angola will overtake Nigeria as number one oil producer in Africa.”