Nigeria’s oil industry appears to be sending a troubling message. The country posted a 43.3 per cent drop in gross profit from crude oil and gas sales in 2024, slipping from ₦1.90 trillion in 2023 to about ₦1.08 trillion, despite a modest rebound in production. On the surface, this may seem like another dip in a volatile commodity cycle, but a closer look reveals deeper structural issues that could threaten Nigeria’s long-term energy and fiscal stability.

Production Up, Profits Down

In 2024, Nigeria managed to raise crude output to approximately 442 million barrels, representing a 12.6 per cent increase from the previous year. Average daily production also rose from 1.27 million to 1.43 million barrels per day. Yet this improvement in volume failed to translate into stronger profits.

The decline suggests that margins, pricing, and rising production costs have eroded the country’s oil profitability. According to data from the Budget Office, gross profit from crude and gas accounted for just about 8 per cent of total oil and gas revenue. Much of the increase in overall earnings came instead from royalties, taxes, and exchange-rate gains rather than real improvements in oil sales or operational efficiency.

Margin Pressure and a Changing Global Landscape

The fall in profits, despite higher output, highlights a classic case of margin compression. Global oil prices and quality differentials now play a greater role than sheer production volume. Rising competition, the global shift to cleaner energy, and increasing production costs, particularly in ageing oil fields, have all combined to squeeze Nigeria’s bottom line.

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At the same time, domestic challenges such as crude theft, pipeline vandalism, poor infrastructure, and regulatory delays continue to weigh heavily on the sector. Even with new marginal-field licences granted under the Petroleum Industry Act, many of these assets are yet to deliver the expected returns, making Nigeria’s extraction costlier and less efficient.

Naira Depreciation and Accounting Gains Masking Reality

While profit from crude sales dropped sharply, Nigeria recorded a major surge in revenue from currency revaluation gains, rising from ₦791.88 billion in 2023 to ₦4.24 trillion in 2024. Although this appears positive on paper, it reflects exchange-rate revaluation rather than genuine improvements in oil performance. Analysts caution that relying on such accounting gains can create a false sense of fiscal stability, masking the real weakness in oil fundamentals.

The Strategic Dilemma for Nigeria’s Oil-Dependent Economy

Nigeria still depends heavily on oil revenues to fund its national budget. If crude earnings continue to decline even when production improves, the country faces two major problems: shrinking fiscal space and waning investor confidence. Relying solely on output growth without addressing structural inefficiencies exposes the economy to deeper vulnerability.

The 43 per cent earnings drop is not merely a short-term fluctuation. It reflects a structural shift in the energy economy. Global buyers are demanding cleaner, more efficiently produced oil, while local producers remain bogged down by outdated infrastructure and policy uncertainty. To stay competitive, Nigeria must transition from the mindset of “producing more” to one of “producing smarter.”

Looking Ahead: What Must Be Done

The future of Nigeria’s oil economy depends on value creation, not volume expansion. Investments should focus on improving production efficiency, rehabilitating infrastructure, reducing crude theft, and cutting operating costs.

In addition, Nigeria must diversify its revenue base beyond crude exports. Strengthening the downstream sector, expanding gas utilisation, supporting local manufacturing, and improving tax collection will provide a more stable source of income. The government also needs to adopt transparent reporting systems to ensure that oil-company remittances reach the Federation Account in full and on time.

Reform Requires Trust

There is a direct link between trust and taxation. When investors believe the system is fair and predictable, they participate willingly. When it appears arbitrary or opaque, they hold back. Fiscal reform in Nigeria must therefore be rooted in credibility, consultation, and clarity.

The choice before Nigeria’s fiscal policymakers is simple: to chase quick revenue through heavy taxes and accounting gains, or to build sustainable prosperity through structural efficiency and investor confidence.

Conclusion: A Time for Strategic Recalibration

Nigeria’s decline in crude earnings, despite a rise in production, should serve as a wake-up call. The country’s oil era is not over, but it is entering a new phase where efficiency, transparency, and strategic adaptability matter more than ever.

Producing more is no longer enough. The real test lies in how effectively Nigeria can produce, market, and monetise its resources in a changing world. Because in the energy business of the future, volume alone will never guarantee value.