The Budget Office of the Federation has revealed that Nigeria earned ₦3.34 trillion in net oil revenue in the last quarter of 2024. This figure falls 21 percent short of the government’s quarterly projection of ₦4.24 trillion.
While the figure represents a modest 65 percent increase compared to the same period in 2023, it still signals that the country’s oil sector, traditionally its biggest income earner, continues to struggle with instability, theft, and declining production capacity.
Understanding the Numbers
To put this in perspective, for every ₦100 the federal government had budgeted to receive from oil in late 2024, it earned only about ₦79.
This underperformance translates to a shortfall of roughly ₦900 billion in just three months. This amount is large enough to fund several major infrastructure projects or bolster key social programs.
The total gross oil revenue (before deductions and transfers) for the quarter stood at ₦3.9 trillion, also below the ₦5 trillion estimated target. This marks a 22 percent shortfall compared to expectations and a 15 percent drop from what was earned in the preceding quarter.
However, the outlook wasn’t entirely bleak. Compared to the fourth quarter of 2023, oil revenue rose sharply by more than ₦2 trillion, reflecting the government’s partial recovery from the severe underperformance seen a year earlier.
Why Oil Earnings Fell
The Budget Office attributed the drop mainly to three recurring issues:
- Decline in crude oil production and lifting volumes, meaning Nigeria pumped and exported less oil than expected.
- Low investment in the oil and gas sector, as investors remain wary due to regulatory uncertainty and security challenges.
- High fiscal deductions, including payments related to the petroleum subsidy, which continues to erode federal revenue despite ongoing reform efforts.
These factors have kept Nigeria’s oil output below its Organization of Petroleum Exporting Countries (OPEC) quota, reducing dollar inflows and putting pressure on the nation’s fiscal health.
What Performed Well
Interestingly, some components of oil revenue outperformed projections.
- Royalties from oil and gas brought in ₦2.18 trillion, surpassing the target by over ₦570 billion (36%).
- Concessional rentals and miscellaneous fees, including pipeline levies, exceeded expectations by more than 150% and 118%, respectively.
- Gas flaring penalties and foreign exchange gains, which had no set targets, added a surprising ₦1.33 trillion to overall inflows.
These gains helped cushion the impact of weaker crude sales and lower petroleum profit taxes.
Where Revenue Declined
Despite those gains, major revenue streams such as crude oil and gas sales and petroleum profit taxes performed poorly.
Crude oil and gas sales were 8% below projections, while petroleum profit and gas taxes, a key source of government income, plunged 58% below expectations.
This shortfall in petroleum taxes reflects both reduced profitability of oil companies and tax recovery challenges, signaling the urgent need for fiscal reforms in the sector.
Broader Implications for Nigeria’s Economy
The persistent shortfall in oil revenue has far-reaching implications:
- Pressure on the Federal Budget:
The government based much of its 2024 spending plan on anticipated oil earnings. With a ₦900 billion quarterly deficit, budget execution, especially for capital projects, may face delays or cuts. - Exchange Rate Instability:
Lower oil receipts mean fewer dollars entering Nigeria’s reserves. This can weaken the naira, increase import costs, and intensify inflationary pressures already squeezing households. - Debt Dependence:
The gap between revenue and expenditure could push the government to borrow more, deepening Nigeria’s already heavy debt burden. - Investor Confidence:
Uncertainty around crude production, theft, and subsidy payments continues to deter foreign investment in Nigeria’s oil sector, affecting long-term output and stability.
The Bigger Picture
Despite earning ₦15.06 trillion in total gross oil revenue for 2024, the government still fell short of its ₦20 trillion projection, missing the mark by about ₦5 trillion.
Yet, compared to 2023, this represents an 80% increase, suggesting that while Nigeria’s oil sector is far from stable, it is gradually recovering from the sharp decline of previous years.
Analysts note that the revenue rise may also reflect better tracking of oil exports, partial subsidy reforms, and the benefits of the Dangote Refinery’s impact on local refining prospects.
What Needs to Change
Experts argue that Nigeria’s overdependence on oil exposes its economy to recurring shocks. A sustainable path forward would involve:
- Deepening investment in non-oil sectors, especially manufacturing, agriculture, and digital technology.
- Enhancing transparency in oil revenue accounting to rebuild investor and public trust.
- Phasing out subsidy-related fiscal drains, while implementing targeted social safety nets to cushion low-income households.
- Addressing crude theft and pipeline vandalism through better surveillance and community engagement.
Bottom Line
The latest budget report paints a mixed picture: progress on recovery but persistent structural weaknesses.
Nigeria earned more than last year but far less than it should have. Oil still accounts for a major share of national income, yet volatility in the sector continues to undermine economic stability.
As global energy markets evolve and Nigeria grapples with domestic reforms, the challenge ahead is clear turning oil wealth into lasting prosperity rather than fleeting revenue.
If the government can stabilize production, curb theft, and complete its subsidy reforms, the next report may tell a brighter story. But for now, the numbers serve as a reminder that recovery without reform remains fragile.
