NIGERIA—It would have been unthinkable four years ago to forecast that the U.S. would stop buying crude oil from Nigeria in 2014. Many Nigerians had thought the U.S. would buy Nigeria’s oil until the African country’s wells ran dry.

For several years, the U.S. was the biggest buyer of Nigeria’s oil. The U.S. imported more than 1 million bbl/d in 2005, but the amount dropped last year to 405,000 bbl/d, according to the U.S. Energy Information Administration (EIA).

Nigeria was the sixth largest supplier to the U.S. in 2012, behind Canada, Saudi Arabia, Mexico, Venezuela and Iraq. At its peak, Nigeria supplied 1.3 MMbbl/d to the U.S. The latest figures showed that Nigeria exported just 51,000 bbl/d in January 2014 to the U.S.

Nigeria’s Oil Minister Diezani Alison-Madueke dropped a bombshell at a petroleum forum in Abuja, Nigeria’s capital, in June when she said the U.S. stopped importing crude oil from Nigeria, causing concern and anxiety in the country where oil is the mainstay of the economy.

“I know many of you must have heard [about] the shale gas and the shale oil revolution. This has literally knocked out Nigeria from the export to the U.S.,” Alison-Madueke said. “Nigeria must adopt new policies to confront the change. We must change our ways and policies that we may hold dear which may cause us economic stress in the future. So this market called the shale oil and gas has resulted in Nigeria seeking new markets for its oil.”

Since the discovery of shale oil and gas in the U.S., oil imports from Nigeria and other oil-producing countries have gradually declined over the years. It is unlikely that oil exports from Nigeria to the U.S. will bounce back, as the U.S. is working hard toward becoming self-sufficient in oil production. According to the EIA, the U.S. is expected to surpass Russia and Saudi Arabia as the world’s top oil producer by 2015 and be close to energy self-sufficiency in the next two decades amid booming output from shale formations.

U.S. production could rise to 11.6 MMbbl/d in 2020, from 9.2 MMbbl/d in 2012, as it taps rock and shale layers with the use of horizontal drilling and hydraulic fracturing, according to the EIA.

During the same time period, Saudi Arabian production is predicted to fall to 10.6 MMbbl/d from 11.7 million, and Russia could slip to 10.4 MMbbl/d from 10.7 million.

Nigeria is Africa’s largest oil producer, with oil accounting for more than 90% of its foreign exchange earnings a year, while about 80% of Nigeria’s government revenue comes from oil.

Alison-Madueke said it was time for the Nigerian government to diversify its economy.

However, Andrew Yakubu, group managing director of the Nigerian National Petroleum Corp. (NNPC), said “Nigeria is repositioning its exports in the light of this emergent threat” and has been able to find alternative markets for its crude.

India has replaced the U.S. as the largest importer of Nigeria’s crude, accounting for more than a quarter of its daily output, said Timothy Okon, another senior NNPC official.

He said India now purchases some 30% of Nigeria’s daily crude production, which currently stands at 2.5 MMbbl/d. The NNPC said China and Malaysia were also key buyers of Nigeria’s oil.

“Asia is important, and in that respect we have regards for all markets,” Okon said. “The important thing is to make sure that you are selling the products that you have, and you do not ignore any market.”

The EIA forecast in October that the U.S. could be producing more oil than Saudi Arabia by 2020, and this would force Nigeria and other OPEC members to adapt to changing trade patterns and result in them competing with U.S. exports for market share.

Oil experts have said that Nigeria’s revenue from crude oil may be on course to slump this year as the abundant supply of shale oil to the global market is expected to lead to a reduction in oil price, amid less tax revenue from i international oil companies (IOCs) that have divested some of their Nigerian assets.

During a discussion on shale oil and gas in Lagos in February 2014, analysts from KPMG Professional Services said U.S. shale oil production posed a risk to Nigeria as the increased volume will put oil price on as downward trajectory.

“Government has been able to move very quickly by taking measures to counteract some of the headwinds. It has been successful in finding alternative markets in Asia and China such as India, China and South Korea. But to what extent is this measure sustainable because some of these countries, like China, are sitting on large resources,” said Dimeji Salaudeen, partner and risk consulting head for KPMG’s Africa oil and gas sector. “What would happen when they begin to produce? We need to begin to look for more sustainable, longer-term solutions.

Some suggestions have been made on how Nigeria can keep its oil revenues from falling and remain competitive in the market.

An oil expert in Lagos said Nigeria should pass an investment-friendly Petroleum Industry Bill (PIB), diversify the economy to shield against oil price shocks, address insecurity especially in the Niger Delta oil-producing areas and commercialize the gas sector.

Also, Victor Onyenkpa, partner and head of KPMG’s tax, regulatory and people services, said “Nigeria’s crude reserves have remained more or less the same for the past 10 years and oil companies are waiting for the PIB before making final investment decisions. There are now more opportunities (resources) than there is money to invest.”

He said it was necessary to introduce competitive fiscal terms in the PIB to attract investments to ramp up oil production in the country.

“Nigeria needs to produce more, and to produce more, we need to attract investments bearing in mind that we are competing with other countries,” Onyenkpa said. “We need to have very competitive fiscal terms. It is important that we get the right fiscal terms into the PIB that is currently in the National Assembly.”

Other analysts said now that the U.S. has stopped buying Nigeria’s oil it was time for the West African country to diversify its economy and become less dependent on oil. “Prior to the discovery of oil, Nigeria made a lot of money from agricultural exports,” said Niyi Ogunsola, an agricultural expert.

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