Home > energy, Energy Information Administration, Nigeria > Country Analysis Brief: Nigeria

Country Analysis Brief: Nigeria

October 17, 2012

Country Analysis Brief: Nigeria
Source: Energy Information Administration

Nigeria is the largest oil producer in Africa and has been a member of the Organization of Petroleum Exporting Countries (OPEC) since 1971. In 2011, Nigeria produced about 2.53 million barrels per day (bbl/d) of total liquids, well below its oil production capacity of over 3 million bbl/d, due to production disruptions that have compromised portions of the country’s oil for years. The Nigerian economy is heavily dependent on the oil sector, which accounts for over 95 percent of export earnings and about 40 percent of government revenues, according to the International Monetary Fund (IMF).

The oil industry is primarily located in the Niger Delta where it has been a source of conflict. Local groups seeking a share of the oil wealth often attack the oil infrastructure and staff, forcing companies to declare force majeure on oil shipments. At the same time, oil theft, commonly referred to as “bunkering,” leads to pipeline damage that is often severe, causing loss of production, pollution, and forcing companies to shut-in production. Protest from local groups over environmental damages from oil spills and flaring undermined relations between local communities and international oil companies (IOCs). The industry has been blamed for pollution that has damaged air, soil, and water, leading to losses in arable land and decreasing fish stocks.

In addition to oil, Nigeria holds the largest natural gas reserves in Africa, but has limited infrastructure in place to develop the sector. Natural gas that is associated with oil production is mostly flared, but the development of regional pipelines, the expansion of liquefied natural gas (LNG) infrastructure, and policies to ban gas flaring are expected to accelerate growth in the sector, both for export and domestic use in electricity generation. Uncertainties in Nigeria’s investment policies and regulatory framework have caused a slowdown in oil and gas exploration activity, and delays in project development, including LNG projects. However, the long-awaited and delayed Petroleum Industry Bill (PIB) could potentially iron out investment uncertainties and set a regulatory framework for the country’s oil and gas industry.

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Categories: energy, Energy Information Administration, Nigeria
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