Nigeria’s oil output could drop by as much as 15 percent by 2017 unless the government attracts more investment and resolves cash shortages at state oil firms, a senior Moody’s analyst said on Wednesday.
Africa’s biggest economy produces about 2.1 million barrels per day of oil with foreign and local companies through production sharing contracts and joint ventures.
But projects have been held up because state-oil firm NNPC needs parliamentary and regulatory approval to spend anything. Officials and lawmakers are often six months late in giving their assent, making proposals irrelevant as costs exceed the original budgets. As a result, unpaid bills have been piling up.
“By 2017, if there’s no more investments oil production will drop by 15 percent affecting jointly the government revenues,” said Aurelien Mali, senior analytical adviser, Africa, at ratings agency Moody’s.
“So the cash call funding issues for the joint ventures and the long term funding to drive the deep offshore fields is something that will have to be addressed to maintain at least the production levels of 2.1 million,” he told Reuters in Lagos.
President Muhammadu Buhari took office in May pledging to reform the oil sector and end corruption and mismanagement. He appointed former Exxon executive Emmanuel Ibe Kachikwu to head the NNPC and later asked him to join his cabinet as minister of state for petroleum. Buhari retained the oil portfolio for himself.
Buhari has taken his first steps towards overhauling the state oil firm by giving its exploration joint ventures control over their own budgets as a way to overcome cash shortages.
Nigeria’s economy has taken a hammering from a plunge in vital oil revenues, weakening the naira currency and slashing growth.