Upstream Production Inefficiency and Oil Production Performance in Nigeria: An ARDL Assessment

Nigeria's oil production has remained unstable despite its substantial hydrocarbon endowment and successive reforms aimed at improving upstream-sector performance. This study examines the association between oil production and selected indicators of operational intensity, production inefficiency, market conditions, and institutional change in Nigeria. Annual time-series data covering 2005–2024 are analysed using a log-linear specification estimated through Ordinary Least Squares (OLS) and an Autoregressive Distributed Lag (ARDL) framework, supported by Augmented Dickey–Fuller unit-root tests and post-estimation diagnostics. The OLS estimates show a positive and statistically significant conditional association between gas flaring and oil production, whereas rig activity and Brent crude oil price exhibit positive but statistically insignificant associations. The post-2021 Petroleum Industry Act period is associated with lower oil production in the OLS specification. However, the corresponding ARDL dynamic coefficients are statistically insignificant, and the bounds test provides no evidence of a stable long-run cointegrating relationship among the variables. The findings therefore suggest that the significant contemporaneous associations identified in the levels specification should not be interpreted as evidence of causal or stable long-run effects. Rather, the positive production–flaring relationship indicates that higher-production years have remained associated with greater flaring, pointing to persistent limitations in associated-gas utilization within Nigeria's upstream petroleum system. The study concludes that improving production performance requires attention not only to drilling activity and market incentives but also to infrastructure, gas utilization, and broader operational constraints.