According to report published by Yemisi Izuora of oriental news, In the first eight months of 2021, the Federal Government spent $2.2 billion or N904 billion on borrowing to make gasoline more affordable. With rising oil prices, keeping the price of gasoline regulated will cost the government N3 trillion in subsidy payments over the next twelve months. Information circulated by the Nigerian National Petroleum Corporation, NNPC, Nigeria may spend more on gasoline and power subsidies this year than it raised last month through a Eurobond issue. Bloomberg also reported that, With the price of crude rising, that figure could surpass N1.5 trillion by the end of the year.
Furthermore, according to Ben Akabueze, director-general of Nigeria’s budget office, President Muhammadu Buhari’s administration is on track to spend an additional N300 billion this year to maintain power tariffs that do not represent the cost of producing and distributing electricity. The interventions would total more than $4 billion, surpassing the $4 billion raised by the government through a Eurobond in September.
The subsidies are robbing the cash-deprived country of needed revenue, while debt servicing consumes around 70% of government revenue more than the $3.8 billion put in place for health and education in 2021. Buhari has said last March to eliminate the costly fuel subsidies. A lot of Nigerians regard less expensive gasoline as their single reliable benefit from the country’s misspend oil wealth.
Petrol prices have stayed steady since December, leaving the NNPC, the country’s only importer of the fuel, to carry mounting losses as Brent crude has steadily grown, hitting $86 a barrel.
Fuel subsidies might cost the NNPC over N3 trillion in the next 12 months if prices aren’t allowed to rise, according to Shubham Chaudhuri, the World Bank’s Nigeria country director.
Nigeria although generating 1.5 million barrels of oil per day, imports all of its gasoline due to the state-owned refineries’ state of disrepair. A percentage of these cargoes is trafficked to neighbouring nations, where the goods are sold on the black market with expensive rates.
The repercussions of these developments simply means that the Government, despite signing the Petroleum Industry Act (PIA) into law, is still reluctant to allow a fully deregulated downstream oil sector because of the harsh realities that follows with regards to the price of Petroleum Products (AGO PMS MGO DPK) The prices of Petroleum Products AGO PMS DPK MGO is likely to keep reflecting the subsidized standard due to government paying the large sum of money for subsidy expenses.
Source: Oriental News, Sun Newspaper, Business day.
