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Nigeria could see an increase in oil revenues from higher oil prices in 2023



Nigeria finally seems ready to increase its oil revenues in 2023, amid positive sentiments in the global oil market. 

Last year after oil prices soared following Russia’s invasion of Ukraine, Nigeria failed to take advantage of it, unlike many other oil-producing countries like Saudi Arabia and international oil companies like Shell, Chevron, Equinor and ExxonMobil. This was mainly due to crude oil theft, which saw the country’s crude production dwindle below 1 million barrels per day as opposed to the 1.8 million barrels per day quota set by the Organization of Petroleum Exporting Countries (OPEC). 

Fast-forward to 2023, the following factors on the international could see Nigeria increasing its crude oil revenues.

Oil demand projection by the IEA: The International Energy Agency has said that in 2023, oil demand will rise. In its February 2023 oil market report, the IEA stated that with demand growth in China as well as an uptick in air travel, global oil demand will hit a record 101.9 million barrels per day, which is 1.4 mb/d more than the 2019 average.   

OPEC’s mute mode: On February 1, 2023, the Organization of Petroleum Exporting Countries (OPEC) decided not to make any adjustments to its current oil production policy. In 2022, the group agreed to cut its oil production target by 2 million barrels per day until the end of 2023.   

Russia’s oil production cut: The decision by OPEC on production policy will remain unchanged even as Russia has made it known that it intends to cut 500,000 barrels per day of its oil production. This is in reaction to the decision of the Group of Seven countries, the European Union and Australia to implement a price cap on seaborne cargoes of Russian oil, setting it at $60 a barrel. 

During the ongoing CERAWeek conference in Houston, USA, Jose Barroso, Angola’s secretary of state for oil and gas, said:  

  • “We believe the Russian oil is still there. They find a way: they find new markets. There is a balance in the market. We believe for the time being there is no need for the OPEC member countries to increase their production.” 

In case you missed it: As of Q4 2022, the Nigerian government had fought against crude oil theft in the Niger Delta region by collaborating with security agencies, communities and other stakeholders. Now, in 2023, the Nigerian National Petroleum Company (NNPC) Limited has pledged to work to increase crude oil production which according to the NNPC’s Group Chief Executive Officer, Mele Kyari, is currently at 1.6 million barrels per day. 

What you should know: Looking at the aforementioned factors, coupled with NNPC Limited’s commitment to increase oil production as well as reduced crude oil theft recorded between Q4/2022 and Q1/2023, there are signs that global crude oil supply will tighten, and crude oil demand will rise in 2023. This will result in increased oil prices and when that happens, Nigeria can finally see an increase in oil revenues.