Nigeria’s oil and gas industry has been forecast to endure production downtime triggered by unanticipated onshore outages.
According to Fitch Solutions Country Risk & Industry Research study, Nigeria’s economic growth in 2023 will be weak as the oil sector, which has been a key drag on development in previous years, will continue to suffer during the year.
“At Fitch Solutions, our oil and gas team expect that Nigerian crude oil production would fall by 15.2 per cent in 2022 and by another 14.9 per cent in 2023,” the forecast added.
The contraction, it claimed, is being driven by unforeseen outages at onshore production facilities, a deteriorating security situation, and the lagged effect of years of underinvestment.
“In 2024, however, we expect that production will essentially stabilize,” Fitch stated.
It noted that this reversal would be driven by rising offshore oil production, which will help offset challenges in the onshore industry.
While output will remain substantially below the levels recorded before 2020, the conclusion of this drop, the paper suggested, will eliminate a fundamental headwind affecting headline Gross Domestic Product (GDP) growth.
“Indeed, this is the key reason why we expect that growth will pick up from 2.5 per cent in 2023 to 3.3 per cent in 2024,” it emphasized.
Fitch generally expected the country’s economy to continue on a sluggish growth trajectory in 2023, owing to activity before the general elections next year.
The research claimed the economy would likely pick up in 2024, with growth reaching 3.3 per cent.
The analysis anticipated that economic growth in Nigeria slid to a six-quarter low of 2.3 per cent in quarter four of 2022, projecting that the country’s economic development would slow further in 2023.
According to Fitch, growth in the agriculture and retail sectors has stepped up a touch, but highlighted that all told, “We expect growth of just 2.7 per cent in 2022 (a slight revision from our previous forecast of 3.0 per cent and 2.5 per cent in 2023,” it noted.
On a second point, Fitch stated disruptions related to the February 2023 general election would present another headwind.
“Campaigning will prevent some economic activity, while government policymaking will essentially shut down,” it projected.
Drawing from past statistics, the research group noted that, in 2015 and 2019, year-on-year growth in the quarter, including a general election, was, on average, 1.1 percentage points weaker than in the prior quarter.
Fitch observed that it still anticipates growth to fall from 2.0% in Q4 2022 to 1.5% in Q1 2023, despite weaker trend growth heading into the 2023 referendum.
If the election causes widespread demonstrations or violence, “the harm to economic activity would of course be substantially bigger,” the report said.