It is most intriguing that at a time Nigeria’s capital importation (hence, external reserves) is rising in leaps and bounds, the country’s crude oil production (output) remains largely static, or marginally increasing. It is no more news that Nigeria has for six consecutive months failed to meet its crude oil production quota of only 1.5 million barrels per day (mbpd) approved by the Organisation of Petroleum Exporting Countries (OPEC).
According to OPEC, since August 2025 (up to January 2026), Nigeria has been unable to meet its allocated quota as a member of the global crude oil cartel. OPEC’s Monthly Oil Market Report January 2026 shows that Nigeria produced about 1.46 million barrels of crude per day in January 2026. Specifically, oil output rose from 1.422 mbpd in December 2025 to 1.459 mbpd in January 2026, representing a marginal increase of about 38,000 barrels per day.
Despite the marginal improvement, this level of oil production remained below the 1.5 mbpd quota, marking the sixth consecutive month that Nigeria has missed its OPEC quota. Nigeria’s crude oil output had dropped in December 2025 by 14,000 barrels per day, in spite of the much-advertised government’s efforts to increase production. In point of fact, Nigerian Upstream Petroleum Regulatory Commission (NUPRC) data show that Nigeria’s crude oil production fell below its OPEC quota in nine months in the whole of 2025.
While Nigeria is experiencing this almost consistent drop in its crude oil production level, its capital importation (over all foreign exchange, FX, inflow) has been rising. The country’s capital importation hit $21 billion in the first ten months of 2025, a 75 percent increase from $12 billion in 2024; and a significant jump from under $4 billion in 2023. Unsurprisingly, foreign portfolio investments (FPIs) dominated the FX inflow composition, accounting for 85 percent ($14.26 billion) of the total capital imported in ten months.
In a direct correlation between the soaring capital importation figures and the pattern of accretion to the nation’s stock of external reserves, the latter (reserves) have been on the rise, hitting $49 billion as of February 5, 2026, according to the Central Bank of Nigeria (CBN). The apex bank has projected the reserves to reach $51 billion by the end of 2026.
This FX external reserves projection, it must be noted, could only be attained at the detriment of the crude oil production and near-starvation of liquidity (or credit) on the part of majority of the real (or productive) sector operators. The CBN has experimented with a high interest rate regime, and gotten addicted to it; and seems to have been reaping its reward in form of steadily-rising FPIs inflow.
Having kept the benchmark interest rate in the economy — Monetary Policy Rate (MPR) — at 27.5 percent for a long while, the apex bank has been selling (Federal Government of Nigeria, FGN) financial assets at mouthwatering yields. Even as inflation rate had crashed from almost 35 percent as of December 2024 to 15.10 percent at end-January 2026, the apex bank has left the MPR sticky at 27 percent.
All along, the CBN has steadily presented its purported ‘fight’ against spiraling inflation rate as a major reason for the continuing hike in MPR. Now that the inflation rate has practically been nosediving (even if driven by changes in Consumer Price Index, CPI-calculation methodology), the apex bank seems already hooked to its ‘gains’ from the tight monetary stance.
As it were, the CBN has been reaping bountifully, but lazily, from elevated domestic interest rates and high yields on treasury bills, bonds, and other money market instruments. Thus, of the $16.78 billion capital imported into the Nigerian economy in the first nine months of 2025, foreign direct investments (FDIs) accounted for only a minuscule $565.21 million or 3.30 percent. FPIs stood at almost 97 percent.
While the CBN appears to be cruising to economic stability with this pattern of FX inflow, Nigeria’s crude oil sector remains bogged by natural field decline, insecurity, aging assets, lingering oil theft, and organised sabotage. There are also challenges posed by vandalism of pipelines and other critical infrastructure, and energy transition fallouts.
In recent times, not a few international oil companies (IOCs) have divested fully or in part, their oil assets in Nigeria — leaving indigenous oil companies to be in-charge as owners/operators. So far, most of these indigenous owners/operators have been confronted by numerous challenges, ranging from legal huddles, environmental issues to funding burdens. Partial or non-implementation of aspects of the Petroleum Industry Act (PIA) is rubbing off negatively on the crude oil industry.
It was not until a few days ago that President Bola Ahmed Tinubu had to invoke a section of the PIA to issue an Executive Order to redirect some chunk of oil revenue to the national coffers: Federation Account Allocation Committee (FAAC). Similarly, it was only very recently that two IOCs — Shell and Chevron — publicly announced their proposals to make new investments in the upstream arm of Nigeria’s oil sector — specifically deep offshore.
While all these could yield the desired dividend of improved crude oil output and FX earnings in the future, the extant scenario remains very challenging. The 2026 budget is based on crude oil production assumption of 1.8 million barrels per day — while actual output keeps hovering around 1.5 mbpd. This shortfall only translates to more deficits in the Appropriation Act 2026 — leading to more borrowing by the government as their deficit-financing approach.
As is already well established, the federal government’s borrowings from the local financial market constricts the space for private sector fund users; they are “crowded out.” Meanwhile, the CBN feels ensconced in its sky-high interest rate regime that has proved deleterious to a wide spectrum of the real sector operators.
As the apex bank is bent on enjoying the unsustainable FPIs inflow, the “patient fund” — FDIs — are chased away. Where will funds that drive durable economic development, employment, or structural transformation come from? Can FPIs fund factory constructions, infrastructure development, and long-term business expansion?
Ultimately, the coincidence of rising FPIs and declining or unstable crude oil output portends many vulnerabilities and fragility for the Nigerian economy. Holding onto FPIs for the eventual transformation of the Nigerian economy is akin to clutching onto a placebo as the real solution. The deep-rooted disease remains but the perception or feeling of wellness hangs around interminably.
- business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com
Marcel Okeke, a practising economist and consultant in Business Strategy & Sustainability based in Lagos, is a former Chief Economist at Zenith Bank Plc. He can be reached at: obioraokeke2000@yahoo.com; +2348033075697
(text only)
