Nigeria’s crude production stood at 2.07 million barrels per day during the first quarter of 2020, the country’s highest level in more than four years.
According to the National Bureau of Statistics (NBS) in the latest Gross Domestic Production (GDP) figures released on Monday, GDP expanded 1.87 percent in the three months through March from a year earlier, compared with growth of 2.55 percent in the fourth quarter of 2019.
While crude prices started dropping in the first quarter due to the tension between Saudi Arabia and Russia that led to an oil price crash during the coronavirus outbreak, Nigeria ramped up production to compensate for the fall in income.
During the period, oil output rose to 2.07 million barrels a day, compared with 2 million in the fourth quarter of 2019 and 1.99 million barrels in the first quarter of last year. That’s the highest level since the start of 2016.
However, with the crash, annual growth in the oil sector contracted by 1.3 percent from January to March compared to the previous quarter which recorded 5.06 percent.
As an oil dependent economy, the plunge in crude prices will weigh on Nigeria’s economy this year and GDP could contract 3.4 percent in 2020, according to the International Monetary Fund (IMF).
Oil contributes less than 10 percent to Nigeria’s GDP (9.50 percent), but it accounts for half of the government’s income and about 90 percent of foreign exchange earnings.
With recent development, the country which is OPEC’s largest African crude producer has cut the benchmark price of the commodity in its budget from $57 per barrel to $25 per barrel for 2020 while keeping spending targets mostly intact, a step which would mean more borrowing to finance the fiscal plans.
Nigeria’s oil revenues declined by N125.5 billion ($326 million) in the first quarter, an indication of the troubles the economy is facing from the coronavirus pandemic and low crude prices, Minister of Finance, Mrs Zainab Ahmed said last week.
In a worst case scenario, the Federal Government noted that without stimulus, the economy could contract by 8.9 percent but the minister noted that the country was working towards a less than 5 percent contraction.
Meanwhile, the World Bank expects the coming recession to be much more pronounced than in 2016 and potentially Nigeria’s worst financial crisis in four decades.
