Time is running out

Based on proven oil reserves of 37bn barrels and daily oil production of 2m barrels, Nigeria's oil will run out in...

Read Our Story

How much does Nigeria make from oil?

At a current price of $65 per barrel, Nigerian crude oil exports records 2.2 million barrels per day. The huge export number generates income especially the excess crude gains. From 1999, Nigeria has welcomed increasing though fluctuating revenue from oil.

Total flow From Oil and Gas US
$ (Billions)
Source: NEITI & Budget Office of the Federation
Analysis of Oil & Gas flows to Federation total Revenue (1999 - 2013)

How much oil revenue has Nigeria lost?

As the section above has shown, Nigeria makes a lot of money from the sale of oil; such that revenue from the oil industry accounts for almost 75% of the Budget. Now, read about the various causes of oil revenue loss.

These numbers are extracts from the NEITI report
Use the dropdown below to change the report year

Issues with the oil & gas industry?

The Nigerian oil Industry has been reported to have lost quite a large amount and NEITI in its publication has helped to pinpoint the various causes of the loss in oil revenue within the country. These are listed below:

  • 1. The payment of cash calls to fund upstream production costs

    Nigeria spends a lot of money on funding operations in the upstream sector; these funds are usually used to cover cash calls from the different Joint Venture (JV) agreements in existence and they are of an “opaque” nature. Within the PWC audit; the NNPC Act, which requires that the FGN funds operations carried out by the NNPC, was condemned as this encourages the existence of a “blank cheque” situation between them at the disadvantage of the FGN and consequently the Nigerian people. For example, NEITI reports that within the 2009 – 2011 period, $16 billion was deducted for cash calls; almost 100% more than the cash calls from the 2006 – 08 period.

  • 2. The fuel subsidy payment

    This refers to the amount of money which the FGN allocates for payment to independent petroleum products importers or refineries within Nigeria in order to provide support for consumers of these products within Nigeria. This subsidy is paid by the FGN through the Petroleum Products Pricing Regulatory Agency (PPPRA) into the Petroleum Support Fund (PSF). As was depicted during the subsidy scam period, the records of these payments are poorly kept and as a result of the lack of an efficient method of calculating the amount due to each seller, some sellers have collected more than they should. PPPRA has been able to recover some of these moneys, but it did not remit N4.423 billion to the FGN. In addition to this, the subsidy payments has been skyrocketing over the years - in 2009, N198 billion was paid for subsidy of petroleum products, and in 2010, this increased by more than 100% to N416 billion. The NEITIs audit reports shows a disparity of N175 million between the figures reported by OAGF and PPPRA with regards to the total subsidy paid within the years of 2009 and 2011.

  • 3. Lack of an efficient method of measuring the amount of Crude Oil that is mined

    Oil is measured at terminals but not at well heads of flow stations. Around 10% of oil is estimated to be lost or stolen between these points resulting in lost revenue for the government. This absence of a proper method of measuring the amount of oil that is mined makes it difficult to quantify the losses or calculating the amount stolen at the source. Unverified data from NNPC and other stakeholders suggest that almost $4.069 billion was stolen in 2011 alone.

    In addition to that, various audit reports have shown that there are often conflicting data submitted by the different stakeholders involved in the core areas in the extractive industry – like in the production, lifting and refinery deliveries area. These areas are prime areas where a lot of revenue is lost.

  • 4. Discretionary deductions

    The sum of $1.746 billion was withdrawn from the cash call account of NNPC without any proper documentation of its use but with an inadequate explanation of use for ad hoc activities.

  • 5. The utilization of favourable exchange rates by NNPC

    N98 billion ($653 million) was lost by the FGN in the periods between 2009 – 2011 as a result of the favourable exchange rates being utilized by NNPC to pay back its debts to the FGN. NEITI and a couple of other bodies have raised the alarm on this practice.

  • 6. Allocation of crude oil to the NNPC

    NNPC receives about 450, 000 barrels of crude oil per day for processing at the country’s refineries, yet the refineries produce less than that amount leaving NNPC with extra crude which is then exported. NEITI reports that within 2009 – 2011, only an average of 20% was delivered to local refineries, the rest was exported or used for offshore processing, crude oil exchange and product exchange. This amounted to more than $866 million lost by the country in this period.

  • 7. Unclear and obsolete legislation

    Nigeria’s petroleum industry is still governed by the 1969 Petroleum Act with the Petroleum Industrial Bill (PIB) spending more than 900 days at the National Assembly without being passed. In addition, some aspects of tax legislation in Nigeria are unclear and this has led to beneficial interpretations of taxes by oil companies resulting in reduced revenue for government both from PPT and Royalty payments. The tax regime of the sector is one characterised by ‘unregulated self-assessment’.

  • 8. Money owed to the FGN

    NNPC owes the FGN an amount of N1 trillion each year and this is merely a part of the many debts owed to the FGN. Oil companies are also included in the list of debtors to the FGN, even though they have tried to superficially address this issue, there are still other methods being utilized to short change FGN, through practices such as:- tax deductions (about $604 million was reported to have been lost through improper tax deductions) , some of these companies do not pay the full amount they are obligated to pay for the education tax (this amount to a total of $512, 812, 744 for the periods of 2009 – 2011), unpaid NDDC contributions also make up the total amount of money owed to the FGN.

  • 9. Lack of transparency and clarity in transactions of NNPC

    Most of the transactions involving crude oil undertaken by NNPC is carried out using methods which require more layers of fiscal dealings, difficult calculations and greater opacity in them. There are never any direct methods utilized, examples of these methods include - Alternative JV finance, Product exchange contracts, Offshore processing contracts, In-kind payments of operation tax and royalty debts. In 2011, these methods accounted for about 354% in revenues.

  • 10. Inefficient Refineries

    The few refineries we have in Nigeria are mostly not functional, causing the importation of refined crude oil products incurring more expenses rather than generating revenue. Refining crude oil locally could eliminate the cost of transportation added on the international option invariably reducing subsidy payment significantly and increasing opportunities for employment within the country.