Oil Revenue: Low production undermines benefits of high crude oil prices
By Obas Esiedesa
Nigeria lost an estimated $839.22 million in oil revenue in the first four months of 2026 after failing to meet its 1.5 million barrels per day (mbpd) crude oil production quota set by the Organisation of Petroleum Exporting Countries (OPEC), findings by Financial Vanguard have shown.
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However, the country recorded a success last month with a total oil production, comprising crude oil and condensates, increasing by 2.2 per cent to 1.70 million barrels per day (bpd), while crude oil output exceeded the country’s OPEC production quota for the first time in nearly one year.
Data released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that combined oil production rose from 1.66 million bpd in April to 1.70 million bpd in May.
The commission reported that crude oil production averaged 1.53 million bpd during the month, surpassing Nigeria’s OPEC quota of 1.5 million bpd by two per cent and marking the first time the country has met and exceeded its allocation in 2026.
The May 2026 production figures represent the highest combined crude oil and condensate output since July 2025, when production reached 1.71 million bpd. In crude oil alone, the 1.53 million bpd recorded last month is the highest level since January 2025, a 15-month high.
Weak output
Data obtained from NUPRC and the Central Bank of Nigeria (CBN) showed that the country have been recording significant shortfalls in both OPEC quota and 2026 budgeted output benchmark month-on-month to April this year, limiting its ability to take advantage of higher crude oil prices driven by the Middle East crises so far this year.
Details of oil output reports by both OPEC and CBN showed that in January, Nigeria produced 45.236 million barrels of crude oil, representing an average daily output of 1.459 mbpd. This translated into a production shortfall of 1.264 million barrels for the month.
With Bonny Light crude trading at an average of $68.05 per barrel, according to CBN data, the country recorded an estimated revenue loss of $86.02 million.
In February, crude oil production dropped to 36.783 million barrels, averaging 1.313 mbpd. This resulted in a monthly shortfall of 5.217 million barrels and an estimated revenue loss of $377.35 million, based on an average crude price of $72.33 per barrel.
For March, Nigeria recorded a production shortfall of 3.132 million barrels after producing 42.868 million barrels, equivalent to an average daily output of 1.386 mbpd. The shortfall translated into an estimated revenue loss of $332.27 million during the month.
Production improved in April, with output rising to 44.657 million barrels, or 1.488 mbpd. But the improvement still fell short of benchmarks, missing OPEC target by 0.344 million barrels, resulting in an estimated revenue loss of $43.59 million.
CBN data also indicated that oil exports remained weak during the period, averaging less than one million barrels per day for most of the first four months of the year.
Oil exports stood at 1.01 mbpd in January but declined by 14.8 percent to 0.86 mbpd in February. Exports improved marginally to 0.93 mbpd in March before rising to 1.04 mbpd in April.
2026 budget under threat
Findings by Financial Vanguard further showed that the persistent production shortfalls could undermine the implementation of the 2026 budget, which is benchmarked on crude oil production of 1.8 mbpd.
Available data indicate that average crude oil and condensate production stood at 1.58 mbpd in the first four months of the year, significantly below the budget benchmark.
NUPRC figures showed that total average daily production was 1.627 million barrels in January, 1.483 million barrels in February, 1.546 million barrels in March, and 1.663 million barrels in April.
The cumulative revenue loss from the monthly figures is approximately put at $839.23 million by the data.
Challenges
Speaking on the development, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, hinted that the Federal Government’s drive towards massive investments in the sector may have failed to materialize.
He also attributed the production shortfalls to traditional challenges of persistent crude oil theft and pipeline vandalism.
According to him, while security interventions have helped improve production levels compared to previous years, Nigeria still faces significant challenges in attracting the scale of investment required to sustain higher output levels.
Industry analysts have similarly linked the country’s inability to consistently meet its OPEC quota to underinvestment in upstream infrastructure, and operational challenges in key producing fields.
Despite recent improvements in output, concerns remain over Nigeria’s capacity to sustain production levels at or above its OPEC quota in the months ahead and achieve the ambitious production target underlining the 2026 budget.
More expert insights
A petroleum sector governance expert, Henry Adigun, attributed Nigeria’s inability to meet its OPEC production quota and the 2026 budget benchmark to persistent crude oil theft, pipeline vandalism, inadequate investment and structural challenges in the upstream sector.
Speaking with Financial Vanguard, Adigun noted that while government reforms under the Petroleum Industry Act (PIA) have improved the fiscal environment for investors, production growth cannot occur overnight due to the long lead time required for investment decisions and field development.
According to him, Nigeria’s production challenges extend beyond pricing and market conditions, as operators must contend with security concerns and infrastructure constraints that continue to discourage investment.
“To sell more, you have to produce more. The capacity to produce more depends on several factors. One is the fiscal regime, which is much better now than it used to be. The second is investment in the sector, while the third is the high level of crude oil theft taking place in Nigeria,” he said.
Adigun explained that increasing crude oil output requires significant capital expenditure and long-term planning by operators, adding that higher oil prices alone do not automatically translate into increased production.
“The whole idea of the PIA was to incentivise production. A lot of the amendments made through executive orders were also designed to encourage investment and boost output. However, you cannot simply switch gears overnight and start producing more oil.
“If your rig count is low and prices suddenly rise, companies will not immediately commit fresh investments because they are uncertain how long those prices will remain attractive. Moving drilling rigs from one location to another country takes time and involves significant costs,” he stated.
He noted that despite improvements in the regulatory framework, substantial investment opportunities remain untapped across the industry.
“There are still many marginal fields lying fallow and not being exploited. Several asset sales and commercial agreements have also not been concluded. While we have made progress on the fiscal side, transparency in the sector is still not where it ought to be, and the overall investment climate can improve further,” he said.
Adigun further clarified that condensate production, which is often included in Nigeria’s total liquids output, differs from crude oil production and is not counted under OPEC’s crude oil quota system.
According to him, condensate is a valuable hydrocarbon associated with natural gas production and commands strong demand in the international markets because it requires less refining than conventional crude oil.
He stated: “Condensate is a very valuable product. In many cases, refineries would rather buy condensate because it requires less processing.
“However, OPEC does not include condensate in its crude oil production quota calculations, which is why there is often a difference between Nigeria’s total liquids production and its official crude oil output”.
Adigun expressed doubts that Nigeria would achieve the 1.8 million barrels per day oil production benchmark contained in the 2026 budget, despite recent improvements in output levels.
“What we put in the budget was 1.8 million barrels per day, but I do not think we are going to get there this year. Production is improving, but the structural issues affecting investment, security and field development mean that achieving that target will remain difficult,” he added.
In a note to Vanguard, Partner at Kreston Pedabo, a professional services consulting firm, Mr. Olufemi Idowu, stated that but for the persistent challenges hampering growth in Nigeria’s oil and gas sector, the country could have earned significantly more from the recent rise in crude oil prices.
According to him, “Nigeria should ordinarily be earning more from the recent surge in global crude prices, but unfortunately, we have struggled to take advantage because the same long-standing problems continue to hold production down.
“For instance, crude theft and pipeline vandalism continue to disrupt oil output. Ageing infrastructure also limits production capacity, while years of underinvestment mean many fields are not producing at the levels they should. Even with the reforms that have been introduced on paper, operators still face uncertainty and delays that make it difficult to respond quickly when market conditions become favourable.”
Idowu noted that addressing the situation would require a combination of improved security, increased investment, and policy consistency.
He stated further: “Securing pipelines and export routes is critical because no investor will commit substantial capital when losses remain high. Addressing joint venture funding bottlenecks, accelerating regulatory approvals, and providing operators with confidence that policies will remain stable would help unlock stalled projects.
“If Nigeria can stabilise the operating environment and attract renewed investment into deepwater and brownfield assets, production is likely to increase. Strengthening domestic refining capacity would also reduce losses and ensure that more value is retained within the economy.
“All these challenges make the current situation appear to be a missed opportunity.
“With a sizable deficit projected in the 2026 budget, higher production during this period of elevated oil prices could have provided much-needed fiscal relief, boosted foreign exchange earnings, and reduced borrowing pressures. Instead, it appears the government is watching a favourable market cycle pass by without fully benefiting from it.
“The window of opportunity has not completely closed, but the country cannot afford to continue repeating this pattern.
“Addressing these structural constraints is the only way to ensure that future opportunities are fully harnessed”.
Vanguard News
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