World Bank: Nigeria’s Economic Growth Continues to Suffer from Underperforming Oil Sector

The World Bank has stressed that Nigeria’s growth prospect was being stifled by its underperforming oil sector.

The bank also praised the direct interventions being carried out by the CBN in the agriculture and manufacturing sectors.

But the Brentwood institution in its latest Africa’s Pulse released Tuesday, downgraded Nigeria’s growth prospects to 3.3 per cent a decline from 0.5 percentage points lower than the April 2022 Africa pulse forecast.

On Nigeria’s growth predictions, it stated: “Economic growth in Nigeria continues to suffer from an underperforming oil sector. Oil output was down by 11.8 per cent year-on-year in the second quarter of 2022 against 26 per cent in the first quarter.

“After dropping for the fifth consecutive quarter (from 1.4 million barrels per day in the first quarter to 1.2 million in the second quarter), oil production slowed further in August to a 50-year low of 1.13 million barrels per day, behind Angola (1.17 million).

“It continues to lag the production levels of last year at 1.6 million barrels per day. Despite elevated oil prices, the country’s net official oil earnings have not increased. Several headwinds, such as increasing petroleum product subsidies deducted directly from the gross oil earnings, limited investment in oil infrastructure, and theft on the pipelines, prevent the economy from realising gains from rising oil prices,” it added.

It projected that real Gross Domestic Product (GDP) growth in Nigeria was expected to slow from 3.6 per cent in 2021, to 3.3 per cent in 2022.

On the stance of Nigeria’s monetary authority, it noted that the interventions by the central bank supported economic growth and boosted the value-chain of the agriculture sector.

It added: “Direct central bank lending to the agriculture and manufacturing sectors provided some support to private investment.”

On Nigeria’s debt, the World Bank noted that the assistance extended by multilateral institutions to International Development Association’s eligible countries in the form of the Debt Service Suspension Initiative was dwarfed and as result, the number of countries in or at high risk of distress continues to rise as the risk of a financial crisis mounts.

It stated: “Across the sub-regions, debt edged up in Western and Central Africa (AFW), while it contracted slightly in Africa Eastern and Southern. Excluding Nigeria, oil-exporting countries are expected to reduce government debt significantly.

“Due to its heavy reliance on imported petroleum products and constrained oil production, Nigeria did not benefit from favorable terms of trade induced by the Russia-Ukraine conflict. The downward revision partly reflects headwinds from rising food and fuel prices and a contractionary monetary policy.

It further added: “Nigeria, the largest African oil producer, is set to emerge from the current account deficit of – 0.4 per cent of GDP in 2021 to a surplus of 1.1 per cent in 2022, and edge up to 1.2 per cent in 2023.

“The current account balance is expected to improve in 2022 and 2023 relative to 2021 due to higher oil prices, which offset lower oil output. Higher import prices of food and refined petroleum products weigh on the current account surplus.

“A mega-refinery project that is expected to be completed in 2023 will boost external earnings by drastically reducing imports of fuel and at the same time contribute to the regional supply of petroleum products.”

The report noted that the fiscal deficit for the region was projected to decline slightly from five per cent of GDP in 2021, to 4.8 per cent in 2022 and was set to shrink next year to 4.5 per cent and further to 3.2 per cent in 2024.

It noted that the surplus in oil-rich countries at 1.2 per cent of GDP, excluding Nigeria at -5.9 per cent and South Sudan at -3 per cent, the countries were projected to register fiscal surpluses this year.

“Although revenue from the oil sector constitutes half of the government revenue in Nigeria, the government deficit will stay elevated throughout the forecasting horizon mainly due to persistent problems in the oil industry, since the non-oil sector has not been able to make up for the loss.

“The deficit is predicted to remain stable in non-resource-rich countries, at 5.5 per cent in 2022. It will widen in mineral and metal resource-rich countries by 0.8 percentage point this year and narrow to 3.9 per cent of GDP in 2024 as the consolidation process becomes effective,” it added

NNPCL: Oil Theft, Vandalism Putting Nigeria in Terrible Situation

In the meantime, the Group Chief Executive Officer (GCEO) of the Nigerian National Petroleum Company Limited (NNPCL), Mr. Mele Kyari, on Tuesday said Nigeria is currently in a state of calamity over oil theft, pipeline vandalism and other criminal activities in the Niger Delta region.

Kyari has said Nigeria was in a state of calamity over oil theft, pipeline vandalism and other criminal activities in the Niger Delta region.

He explained that the situation had led to serious low production in the oil and gas industry.

Kyari stated this when he appeared before the Senate’s joint committees on Petroleum (Downstream), Petroleum (Upstream) and Gas.

He concurred with the recommendation made by Senator Albert Bassey Akpan (PDP Akwa Ibom North East), that capital punishment should be put in place for offenders.

He said the crime on oil theft in Nigeria had been on for many years and specifically about 22 years ago, but the dimension and rate it assumed in recent time was unprecedented.

Kyari said, “As earlier stated as a result of the oil theft, Nigeria loses about 600, 000 barrels per day which is not healthy for the nation’s economy and in particular, the legal operators in the field which had led to close down of some of their operational facilities.

“But in rising up to the highly disturbing challenge, NNPCL, has in recent time in collaboration with relevant security agencies clamped down on the economic saboteurs.

“In the course of the clamp down within the last six weeks, 395 illegal refineries have been deactivated, 274 reservoirs destroyed, 1,561 metal tanks destroyed, 49 trucks seized and the most striking of all, is the four kilometeres illegal oil connection line from Forcados Terminal into the sea which had been in operation undetected for 9 solid years,” he said.

He explained further to the committee that in addressing the menace, the NNPCL carried out aerial surveillance of the affected areas and saw the economic saboteurs carrying out their activities unchallenged and unperturbed.

“The problem at hand is not only security but social as locals in most areas where the illegal refiners operate, unknowingly serve as their employees by mistaking them for operatives of licensed companies for oil exploration and production in the area,” he stated.

He further added that being a problem requiring urgent solution, the Cambodia and Mexico models of involvement of non-state actors was being adopted by NNPCL with involvement of three private security companies.

He said, “It is not abnormal to involve non – state actors for protection of oil pipelines and other critical infrastructure as done in Cambodia and Mexico which produced desired results.”

On non – remittances from NNPCL into the federation account since January, Kyari told the committee members that the company was not owing Nigeria, but rather the country owed it N1.3 trillion

In his closing remarks, the Chairman of the joint committee, Senator Mohammed Sabo Nakudu (APC Jigawa South West), told the NNPCL boss to get prepared for oversight functions on Port Harcourt and Warri Refineries claimed to have been rehabilitated.

Virtually all members of the three committees attended the interactive session which lasted for about four hours.

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