Report: Nigeria Must Raise Oil Output by 37% to Meet N36.3trn Revenue Projection in 2025

Although Nigeria continues to ramp up oil production, a report by PwC, a global business advisory firm, has indicated that the nation will need to raise crude output by 37 per cent to achieve the federal government’s ambitious feat of N36.35 trillion revenue in 2025.

In December 2024, after years of stalling, Nigeria finally hit its Organisation of Petroleum Exporting Countries (OPEC) volume, reaching 1.5 million barrels per day, excluding condensate of about 200,000 bpd.

This year, the federal government is proposing 2.06 million bpd oil production and oil price of $75 per barrel. The PwC report was titled: “2025 Nigeria Budget and Economic Outlook.”

In addition, PwC projected that if the oil production figure is met, Nigeria’s trade surplus will be sustained, but noted that this ambition is subject to fluctuations in global oil prices, since crude remains Nigeria’s largest export.

“Global average oil price in 2024 was $78.05 per barrel. High price is dependent on increased China demand, OPEC supply restriction, US shaling, etc. Target requires a 37 per cent increase over 2024 average production of 1.5 mbpd achievable through improverments in security, investment, and regulatory frameworks (and) investments by Shell and TotalEnergies in the Bonga deepwater field and the Ubeta upstream,” PwC added.

Also, to hit the N1500/$ exchange rate projected by the Bola Tinubu administration, the analysis showed that for a positive balance of payments, Nigeria requires significant increase in diaspora remittances and increase in foreign portfolio investment.

“Government revenue is expected to grow in 2025 on the back of government reforms, however, achieving the ambitious target of N36.35 trillion will require significant effort,” the report added.

Besides, the report noted that Federation Account Allocation Committee (FAAC) allocation in 2025 will be driven by the outcome of the implemented fiscal reforms, exchange rate fluctuations, oil production levels, and global oil price.

With Nigeria’s trade surplus growing by 511 per cent, reaching N6.95 trillion in Q2, 2024, up from N133.2 billion in Q2, 2023 and driven by a 190.9 per cent increase in crude oil exports to N14.6 trillion, PwC noted that this trend will likely be sustained this year.

“The trade surplus is expected to continue in 2025, supported by higher crude oil production and prices. However, the trade balance remains susceptible to fluctuations in global oil prices, as crude oil exports account for the largest share of Nigeria’s total exports,” it said.

In H1, 2024, oil exports rose to N34.87 trillion, the report said, significantly outpacing non-oil exports by nearly 14 times, while oil exports grew significantly by 97 per cent from N17.81 trillion in H1, 2023, compared to non-oil exports which rose only by only 37.3 per cent, highlighting Nigeria’s heavy reliance on crude export.

“With a cheaper naira under the floating exchange rate, 2025 presents a critical opportunity to diversfy export earnings by boosting non-oil exports. Investments in value-added production, export incentives, and improved logistics could help reduce dependency on oil and mitigate external vulnerabilities.

“Revenue generation has significantly improved, driven by higher tax revenues and enhanced oil production. As of August 2024, 73.8 per cent of the pro rata budget had been achieved. Sustained growth is anticipated in 2025. However, the revenue target of N36.35 trillion is unlikely to be met due to oil revenue constraints and a low tax base. Crucially, effective tax reforms may help achieve the non-oil revenue targets,” it stressed.

It also raised questions over Nigeria’s debt to Gross Domestic Product (GDP) of 50.7 per cent recorded in October 2024, which remains above the 40 per cent debt to GDP threshold. 

“The proposed fiscal deficit of N13.8 trillion (3.87 per cent of GDP) in 2025, exceeds the 3 per cent limit set by the 2007 Fiscal Responsibility Act. Rising bilateral and multilateral debt in Nigeria indicates potential future financial pressure if not matched by economic growth and revenue generation, highlighting significant detbt sustainability issues,” PwC projected.

With additional investment expected in the oil & gas sector due to new licences and need to raise funds by government, stated that this would be boosted by deep offshore and marginal oil licensing bid rounds may unlock additional investment in the oil & gas sector. 

Specifically, the business advisory company said that Joint Venture (JV) between the Nigerian National Petroleum Company Limited (NNPC) and Chevron Nigeria will  boost crude output by 165,000 bpd, helping to raise the country’s revenue.

It also touched on Nigeria’s efforts to raise gas production, noting that with 10 projects expected to be delivered and $14 billion in revenue, the projection is that Nigeria should be able to take in $12 billion.

“The Decade of Gas policy (is) expected to deliver 10 projects, attract $14 billion in Foreign Direct Investments (FDIs), raise $12 billion in revenue through royalties and taxes, and create 2 million jobs by 2030,” it said.

However, it noted that the risk in the global oil market and geopolitical tensions may continue to leave Nigeria exposed to shocks.

THISDAY