Featured Gas Oil

N1.6tr petrol subsidy threatens budget implementation

The Federal Government’s subsidy on petrol is likely to hit N1.63 trillion by December, data obtained from official source have shown.

Official data from the Nigerian National Petroleum Corporation (NNPC) shows that the corporation paid about N757 billion as subsidy as at the end of July.

The report indicated that subsidy rose from N25.37 billion in January to N175.32 billion within seven months (as at July).

According to the report, subsidy or under-recovery costs borne by the NNPC stood at N60.40 billion in February; N111.97 billion in March; N126.30 billion in April; N114.34 billion in May; N143.29 billion in June and rose to N175.32 billion in July.

In March last year, the government announced the stoppage of fuel subsidy payment when global oil prices were low. But as global oil prices rose, the government continued to keep domestic control on retail prices of the product, thus leading to the return of subsidy payment.

Analysts at Cordros Group, a leading investment banking and research group, at the weekend said under-recovery costs could hit N1.63 trillion by the end of this year given the dynamics of the global crude oil price, domestic consumption and retail price.

The analysts said: “At the July run rate, we estimate under-recovery costs will settle at NGN1.63 trillion or 32.5 per cent of our projected Federal Government of Nigeria’s retained revenue of N5.02 trillion in 2021.”

They noted that with the under-recovery costs not provided for in this year’s Appropriation Act and their deduction by NNPC before remitting funds to the Federation Account, the government revenue will continue to be constrained for the remaining months of the year amid an increase in total expenditure.

Last week, the NNPC expressed concerns that concerted efforts by the corporation and some other agencies to combat the menace of product smuggling have been largely hampered by existing arbitrage triggered by the huge price differentials in pump price across the Nigerian border.

In a presentation at an interactive session by the Joint Senate Committee on the 2022-2024 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP), NNPC Group Managing Director Mallam Mele Kyari, said with a price difference of over N100 per litre in Nigeria and in neighbouring countries, it was difficult to cage smuggling.

The NNPC GMD said though the Corporation, working in concert with other agencies, has made noticeable progress in combating the menace, the battle was far from being over.

Kyari told the panel: “As long as there is arbitrage between the price that you sell and what is obtainable elsewhere, you can be sure that it is very difficult to contain the situation.”

He emphasized that the activities of smugglers have also made it difficult to determine the actual petrol consumption figures, noting that the Corporation can only know what was trucked out from loading depots across the country but cannot determine how much of that was consumed in-country.

On the MTEF assumptions, the GMD reiterated a base oil price scenario of $57 per barrel for 2022, $61 per barrel for 2023 and $62 per barrel for 2024 predicated on a base national production of 1.883 million barrels per day in 2022, 2.234 million barrels per day in 2023 and 2.218 million barrels per day in 2024.

Kyari explained that the assumptions were arrived at after consultations with the Ministry of Finance and other relevant stakeholders while also undertaking a careful appraisal of the three-year historical dated Brent oil price average of $59.07 per barrel premised on Platts Spot Prices among other considerations.

He reiterated that price growth was to be moderated by the lingering concerns over COVID-19, increased energy efficiency as well as obvious switching due to increased utilisation of gas and alternatives for electricity generation.

The Senate joint panel session was chaired by Solomon Adeola, with members drawn from the committees on Finance, National Planning, Foreign and Local Debts, Banking, Insurance and other Financial Institutions, Petroleum Resources Upstream, Downstream Petroleum Sector & Gas.

Related posts

Bayelsa oil, gas park to create 2,000 jobs says Sylva

Abisola THOMPSON

Buhari hosts Sultan, Ooni, Sanusi, others to Iftar

By Shile GIWA

US, Germany, Australia, Canada participate in Calabar Bikers’ Carnival

Editor

GEAPP seeks more women inclusion in driving clean energy in Africa

Editor

APC leadership, Senators meet President Buhari, call for reconvening of NASS

Editor

President Buhari’s remarks at 55th Ordinary Session of ECOWAS

Our Reporter