Data from Nigeria’s Budget Implementation Report for Q4 2024, published this week, has shown that profits from the country’s oil and gas sales plummeted by 43% in 2024, despite production increasing on average.

According to Nairametrics, the report (published by the Budget Office of the Federation) shows that profits fell to N1.08 trillion ($751mn) from a high of N1.90 trillion ($1.3bn) in 2023, underscoring an increasingly unreliable source of income for the government despite reforms such as increased upstream monitoring and the removal of petrol subsidies.

Notably, Nigeria’s gross profits from oil and gas have also been overshadowed by increased spending in the sector, with sub-total oil and gas revenue before deductions sitting at N15.07 trillion ($10.4bn) last year, compared to N8.36 trillion ($5.8bn) in 2023. This has occurred despite a rebound in oil production, which has climbed by 14% from 1.34mn barrels in 2023 to 1.54mn barrels in 2024.

With gross profit accounting for only 8% of total receipts, the country may be struggling to keep up with operational costs, inefficiencies, subsidies, and other ongoing expenses that have been absorbing income.

Furthermore, for a country that relies on oil and gas revenue as its main source of income, this shift signifies the government’s newfound reliance on penalties, taxes, and royalties, according to The Punch.

Weak accountability?

According to Lagos State University professor Dayo Ayoade, Nigeria’s decrease in earnings is linked to the petroleum sector’s structural inefficiencies, poor data integrity, and lacklustre transparency.

“The decline in earnings despite improved production shows that the country’s oil industry is still plagued by poor record-keeping and weak accountability,” he said, adding, “Our revenue is based on how many barrels of crude we are selling in the international market. But when you look at the data, it’s not adding up. We are told production is up, but the numbers are not reflecting that improvement.”

The professor continued to tell The Punch that the removal of the country’s petrol subsidy in May 2023 by President Bola Tinubu had no direct link with crude oil income, as it affected refined petroleum products and not crude oil exports.

Ayoade continued to note that reasons for Nigeria’s lacklustre earnings could be down to problematic production data, oil theft, and unrecorded cargoes.

“The numbers are not showing that we have that much crude in the market. If we were truly exporting more, then our receipts should have gone up, not down.” He continued: “This complicated picture shows that there are still poor statistics, poor exporting obligations, and weak monitoring. We need to be more honest about the numbers so that we can plan properly for tomorrow.”

Additionally, Ayoade also suggested Nigeria confront its tendency to sell crude cheaply and import refined petroleum products at premium prices, calling the practice “unsustainable.” He concluded that although local refining was catching up, better transparency and planning were required to ensure success in the sector.