Nigeria's Oil Output Declines 8.3% in December 2025

Nigeria's oil production dropped significantly in December 2025. The Nigerian Upstream Petroleum regulatory Commission reported output fell to 1.544 million barrels per day. This represents an 8.3% decrease from December 2024's 1.684 million barrels per day. The regulator did not provide specific reasons for the decline. This drop comes amid ongoing challenges in Nigeria's oil sector.

Why It Matters

Nigeria's oil production decline has immediate economic consequences. Oil exports account for approximately 90% of Nigeria's foreign exchange earnings. The country's 2025 budget projected oil production at 1.78 million barrels per day. The December figure falls 236,000 barrels per day short of this target. Each 100,000 barrel per day shortfall costs Nigeria about $3.65 billion annually at current prices. This production drop directly impacts government revenue and foreign reserves.

Major oil companies operating in Nigeria face operational challenges. Shell Nigeria reported pipeline vandalism incidents increased 15% in 2025. Chevron Nigeria experienced production disruptions at its Escravos facility in November. TotalEnergies Nigeria delayed maintenance on its Egina floating production vessel. These operational issues contribute to production volatility.

Production Challenges and Regulatory Context

Nigeria's oil sector operates under the Petroleum Industry Act of 2021. This legislation created the Nigerian Upstream Petroleum Regulatory Commission. The Commission oversees licensing, production monitoring, and environmental compliance. Companies must obtain multiple permits including the Oil Mining Lease and the Environmental Impact Assessment certificate. The approval process typically takes 90-180 days.

Security remains a persistent challenge in the Niger Delta region. The Nigerian National Petroleum Corporation reported 112 pipeline vandalism incidents in 2025. This represents a 12% increase from 2024. The Nigerian Navy deployed additional patrol vessels in December. Security operations cost oil companies approximately ₦15 billion ($18.7 million) monthly.

Investment in new projects has slowed. The Bonga Southwest field development requires $10 billion in investment. First oil was originally planned for 2026 but faces delays. The Preowei field development needs $5.2 billion. These projects require final investment decisions from international partners.

Market Impact and Global Context

Nigeria's production decline affects global oil markets. The country is Africa's largest oil producer. It holds OPEC's largest production quota in Africa at 1.74 million barrels per day. The December production of 1.544 million barrels per day falls 196,000 barrels per day below this quota. This represents Nigeria's largest monthly shortfall in 2025.

Global oil prices responded to the news. Brent crude traded at $82 per barrel on January 15, 2026. This represents a 3% increase from December averages. Analysts attribute part of this increase to concerns about Nigerian supply. The International Energy Agency forecasts global oil demand will reach 104.1 million barrels per day in 2026.

What Businesses Should Watch

Companies should monitor several key developments in Nigeria's oil sector. The Nigerian Upstream Petroleum Regulatory Commission will release January 2026 production data in February. This will indicate whether December's decline represents a trend. The Commission plans to auction seven new oil blocks in March 2026. These include deepwater blocks in the Niger Delta.

Watch for security improvements in the Niger Delta. The Nigerian government allocated ₦50 billion ($62.5 million) for pipeline protection in 2026. This represents a 25% increase from 2025. Improved security could reduce production disruptions from vandalism.

Monitor investment decisions on major projects. Shell Nigeria must decide on the Bonga Southwest field by June 2026. TotalEnergies Nigeria plans to sanction the Preowei field in 2026. These decisions will affect Nigeria's medium-term production capacity.

Track regulatory changes. The Nigerian Upstream Petroleum Regulatory Commission may revise production reporting requirements. The Commission currently reports monthly production data with a 45-day delay. Faster reporting could improve market transparency.

Economic Implications

Nigeria's economy faces pressure from the production decline. The Central Bank of Nigeria reported foreign reserves fell to $33.2 billion in December 2025. This represents a 5% decrease from November. The naira traded at ₦800 to the dollar on January 15, 2026. This represents a 15% depreciation from December 2024.

The government may adjust its 2026 budget assumptions. The 2025 budget assumed oil production of 1.78 million barrels per day at $75 per barrel. The actual December production of 1.544 million barrels per day creates a revenue shortfall. Each $1 drop in oil prices reduces government revenue by approximately ₦150 billion ($187.5 million).

Oil companies face operational decisions. They must balance investment in Nigerian assets against security risks. Maintenance schedules require careful planning to minimize production losses. Companies like ExxonMobil Nigeria and Eni Nigeria operate aging infrastructure. These facilities need regular maintenance to sustain production levels.

Looking Ahead

Nigeria's oil sector faces both challenges and opportunities. The December production decline highlights ongoing operational issues. Security improvements could stabilize production in 2026. New project investments could boost medium-term capacity. Market participants should watch for January production data. They should also monitor regulatory developments and security improvements. Nigeria remains a crucial player in global oil markets despite current challenges.