Financial analysts at United Capital Research has said that the oil sector is expected to record its first full-year growth since 2019, with a crude oil production target of two million barrels per day in 2024.
The analysts stated this while reacting to the Nigeria’s Gross Domestic Product (GDP) which grew by 3.19 per cent (year-on-year) in real terms in the second quarter of 2024.
In the report seen by NewsNGR, the analysts said that looking ahead, they still envisage that the Nigerian economy will expand in 2024, driven by a rebound in the oil sector and slow but steady growth in the non-oil sector.
“We align with the International Monetary Fund’s (IMF) projection that Nigeria’s real GDP will increase modestly to 3.1 per cent in 2024. In the oil sector, the Nigerian economy is set to benefit from favourable developments, offering positive momentum in 2024,” the analysts said.
They noted that net exports are expected to be the primary growth driver, with rising oil export volumes due to improved security in the Niger Delta and increased production from the Dangote refinery displacing most of the fuel and chemical imports in 2024.
“This will contribute to a decrease in total goods and services imports and increase the country’s trade surplus. However, production levels remain significantly below the peak of 2.07mbpd recorded in Q1-2020 due to declining investments, divestments by International Oil Companies (IOCs), inadequate contributions from marginal fields, and ageing infrastructure,” it said.
The oil sector recorded an impressive growth of 10.75 per cent year-on-year in the second quarter of 2024 in real terms, indicating an increase of 4.45 per cent and 23.58 per cents compared to the growth of 5.70 per cent year-on-year in first quarter of 2024 and the contraction of 13.43 per cent in the corresponding quarter of 2023, respectively.
This marks the third consecutive quarter of expansion in the oil sector. The impressive performance of the oil sector in Q2-2024 came on the back of the improvements in crude oil production during the quarter following the Federal Government efforts in combatting oil theft and pipeline vandalism.
Notably, the nation recorded an average daily oil production of 1.41m barrels per day (mbpd) in Q2-2024, 15.6 per cent higher than the daily average oil production of 1.22mbpd recorded in the same quarter of 2023.
However, this is 10.2 per cent lower than the daily average oil production volume of 1.57mbpd in Q1-2024.
In the non-oil sector, the analysts expect sustained growth in the services sector and industrial sub-sectors.
“We foresee that the financial services and Information & Communication Technology (ICT) sectors will benefit from a more stable and predictable macroeconomic environment.
The agricultural sector is forecasted to grow, supported by low base effects but hindered by ongoing security issues and unfavourable weather conditions.
According to the analysts, the industrial sector’s growth will be bolstered by higher crude oil production and a modest base effect improvement in manufacturing.
However, they noted that downside risks to these forecasts include worsening FX liquidity, higher-than-anticipated inflation, increased insecurity, and lower crude oil production.