National crude oil and condensate production picked up to 1.92 mbpd in November from 1.78 mbpd. The average for January-November of 1.83 mbpd falls well short of the 2.20 mbpd assumption in the 2016 budget, which explains many of Nigeria’s macroeconomic woes. The NNPC’s Financial and Operations Report for December notes that about 330,000 b/d was shut-in throughout November due to sabotage of the Trans Forcados Pipeline. On the positive side, the pick-up in output, since maintained, helps to explain the recovery in gross official reserves.
The report notes a further decline in pipeline breaks due to vandalism to 18 in December, the lowest of the year. In this context, it is significant that the FGN has restored monthly allowances to the said militants in the delta to the level under the previous administration and provided for amnesty payments in its 2017 budget proposals.
The corporation’s operating deficit narrowed slightly in December from N18.7bn to N17.0bn (US$56m). Higher sales of white products by the Pipelines and Products Marketing Company were responsible for pushing up the NNPC’s revenue and expenditure in the month (see chart).
The operating deficit of N197bn (US$650m) for the full year compares with N267bn in 2015. By far the largest contribution to the deficit was N134bn from central headquarters (CHQ).
What is unclear is the treatment of the losses surely made by importers of petroleum products (principally the NNPC) at current oil prices and exchange rates. There is no provision for subsidy payments in the FGN’s 2017 budget.
Sources: NNPC, Financial and Operations Report, December 2016; FBNQuest Research
The reports notes that power plants generated 1,715 megawatts (MW) in December from gas supplied by the industry, the lowest since June.
