Oil price slump reduces sector’s output by N3.6tn.

The massive drop in global oil prices impacted
negatively on the performance of the Nigerian oil
and gas sector, which recorded a decline of
N3.6tn in output in the 2015 fiscal period.

A report showing the performance of the sector,
which was obtained by our correspondent from
the National Bureau of Statistics, revealed that in
monetary terms, the sector recorded a huge
decline of 37.5 per cent from N9.61tn in 2014 to
N5.99tn at the end of last year.

Further analysis of the report showed that since
the second quarter of the 2014 fiscal year, the
petroleum sector had been recording steady
decline in output
Between the first and second quarters of 2014,
the sector witnessed an increase in output from
N2.61tn to N2.63tn.

However, due to the drop in oil prices, which
began in June 2014, the sector’s contribution to
the economy could not be sustained as it started
declining steadily from the third quarter.
It dropped to N2.32tn in the third quarter of 2014
and further went down to N2.04tn in the fourth
quarter.

In 2015, the sector witnessed its worst
performance in recent times, contributing the
sums of N1.39tn, N1.74tn, N1.53tn and N1.31tn
to the economy in the four quarters of the year.

The report stated that the dismal performance of
the oil and gas sector also impacted negatively
on the contribution of the mining and quarrying
sector to the economy.

There are four main activities that make up the
mining and quarrying sector. They are crude
petroleum and natural gas, coal mining, metal ore
and other minerals.

The NBS report put the
growth in the mining and
quarrying sector at 5.18 per
cent for the fourth quarter of
2015 as against 8.56 per
cent recorded in the
corresponding quarter of
2014.
It stated, “On a nominal
basis, the sector slowed in
the fourth quarter of 2015 by
35.12 per cent (year-on-year)
during the quarter.
“This was substantially below
the growth recorded in the
corresponding quarter of
2014. This drop is
attributable to the falling oil
prices.”
Speaking on the low output
of the sector, financial
experts told our
correspondent that the
inability of the government to
effectively diversify the
economy away from oil was
responsible for the drop in
performance.

For instance, a former
Managing Director, Unity
Bank Plc, Mr. Rislanudeeen
Mohammed, said the country
should have built enough fiscal buffers when
crude oil sold for as high as $140 per barrel.

He said, “Nigeria is a mono product economy
basically. We export only crude because 70 per
cent of our income is derived from oil; 94 per
cent of our foreign earnings is derived from oil,
and oil contributes only about 10 per cent of our
Gross Domestic Product.

“When the price of oil was going up, when it was
in the region of $140, Nigeria was making a lot of
money for years. What Nigeria should have done
is to build fiscal buffers. But this didn’t happen
owing to constitutional challenges.”

[Punch]