Oil theft reduction could ease FX strain – Afrinvest

Afrinvest has projected that Nigeria’s recent success in curbing crude oil theft could ease pressure on the foreign exchange market, boost fiscal revenues, and strengthen investor confidence in the oil and gas sector.

In its latest macroeconomic research note, Afrinvest cited data from the Nigerian Upstream Petroleum Regulatory Commission, which revealed that crude oil losses dropped to 9,600 barrels per day as of July 2025, the lowest level in 16 years, since 8,500 bpd in 2009. This represents a 15 per cent improvement from the 2024 average of 11,300 bpd and a remarkable 90.7 per cent decline compared to the 102,900 bpd recorded in 2021.

According to Afrinvest, this turnaround can be attributed to reforms introduced by the Petroleum Industry Act of 2021, alongside improved collaboration between regulators, security agencies, host communities, and industry operators. Measures such as metering audits across upstream facilities and stricter regulatory oversight were also credited for plugging revenue leakages.

The research firm noted that the reduction in oil theft could provide fiscal relief at a time when government finances are under strain.Despite ongoing disparities between actual crude production levels and the Federal Government’s budget benchmark, with production standing at 1.51 million bpd in July against the 2025 budget target of 2.01 million bpd, reduced theft means more crude is available for export, translating to increased revenues for the Federation Account Allocation Committee.

Afrinvest also stressed the foreign exchange benefits, pointing out that crude oil exports account for about 85 per cent of Nigeria’s FX earnings. “Higher export volumes, stemming from reduced crude oil losses, should result in improved FX liquidity and external reserves, thereby easing pressure on the naira,” the report stated.

The naira has strengthened by 2.4 per cent year-to-date in 2025, trading at N1,501.50/$, largely due to Central Bank of Nigeria reforms.

Furthermore, the firm argued that the sharp decline in crude losses could improve investor sentiment in the oil and gas industry. In recent years, divestments by international oil companies were driven by persistent security and operational risks associated with theft and pipeline vandalism. Afrinvest said the progress now being recorded could rekindle investment appetite in the upstream sector, strengthening output prospects and reinforcing Nigeria’s fiscal and external buffers.

Afrinvest concluded that while production levels still lag behind the Federal Government’s targets, the reduction in crude oil theft is a structurally positive development.

“It signals improved governance and regulatory vigilance in the oil sector and marks another step in Nigeria’s journey toward ramping up oil production and shoring up fiscal revenue,” the firm added.

Oil Theft Reduction Eases Nigeria's FX Strain | Afrinvest Re