Militancy, low oil prices slow oil sector growth by 22%
Militancy and low oil prices have been blamed for the poor results from the oil sector in Nigeria’s third quarter Gross Domestic Product (GDP) contribution of less than 22 per cent representing a decline relative to growth recorded in third quarter 2015 at 1.06 per cent.
According to Nigerian Bureau of Statistics (NBS) data, growth declined by 23.07% points and 4.54% points relative to growth in third quarter of 2015 and second quarter of 2016 respectively and quarter-on-quarter, growth was 8.07%.
As a share of the economy, the oil sector contributed N1.457 trillion or 8.19% of total real GDP valued at N17.8 trillion, down from figures recorded in the corresponding period of 2015 and the preceding quarter of 2016 recorded at 10.27% and 8.26% respectively.
“Militancy and low oil prices have contributed to shrink Nigeria’s oil and gas sector and the entire economy as well. With production average at about 1.6m bpd for Q3 2016, the GDP data from NBS is not a surprise,” said Chijioke Mama, energy analyst
During the period, crude oil production according to NNPC records, averaged at 1.63million barrels per day (mbpd), lower from production in second quarter of 2016. Oil production was also lower relative to the corresponding quarter in 2015 by 0.54million barrels per day when output was recorded at 2.17mbpd.
Maikanti Baru NNPC group managing director said the national oil company has recorded over 1,600 attacks this year alone and this has rendered unrealistic the 2.2million bpd projection on which the 2016 budget was based.
The implication of this according to an industry source is that Nigeria is squarely in recession as and has now extended to another quarter.
“You must realise that the problem of the economy started from the oil and gas sector because the price of crude oil fell drastically. This has had negative impact on a mono economy like ours,” he said.
Nigeria’s economic woes are largely structural and government continues to deal them with using short-term approaches like stabilisation policies where bold structural reforms should suffice.
“Until this economic diversification vehicle comes up to full speed, I think the oil and gas sector requires all the attention this nation can summon,” Mama said.
Analysts say longer-term structural changes are required to deal with an economy where galloping inflation has become a reality.
“When longer-term, structural changes are required to improve aggregate supply, governments must address specific impediments. This may involve the core structure of the economy, such as how prices are set, how public finance is conducted, government-owned enterprises, financial sector regulation, labor market rules and regulations, the social safety net, and institutions,” stated Khaled Abdel-Kader an economist in the International Monetary Fund’s External Relations Department.
However analysts say that the situation can be reversed if the government and all the other stakeholders involved in Niger Delta issue are able to resolve the issue of insecurity.
They also said that the government should create enabling environment for investors to be able to invest in the oil and gas sector, saying that oil needs to be salvage since it is the only source of the country’s foreign exchange.
Olusola Bello & Isaac Anyaogu