The price of Nigeria’s Bonny Light jumped to $91.38 per barrel on February 1 2022 from $90.31, suggesting a $29.38 premium above the $62 per barrel baseline set by the country’s 2022 budget. The increase in price was ascribed to a number of factors, including dwindling oil inventories, which were mostly due to growing demand from businesses reopening following months of Coronavirus quarantine.
As a result, Nigeria expects to generate significant revenue into its Excess Crude Account (ECA a special account established to hold oil revenues in excess of the budgeted benchmark) Nigeria has budgeted to produce 1.8 million barrels daily and between 300,000 and 400,000 barrels of Condensate, which also attracts a high premium like Bonny Light. Dr Felix Amieyeofori, lead promoter of EnergyHub Nigeria spoke about the movements in the oil market: “Inventory is growing down as the world economy begins to pick up notwithstanding the Omicron variety.” Lockdowns are already being eased in some big economies.
Recently, the Minister of Finance and National Planning, Zainab Ahmed, had disclosed that the federal government decided to suspend its plan to remove fuel subsidy because of the negative impact it would have on its citizens. She had stated: “So, even as the government is not immediately removing the fuel subsidy, we have to make sure that what the nation is incurring is efficient, and that it is a real cost that has been consumed by the country.” In the meantime, based on the 65.7 million litres daily national demand used by the Minister of Finance and N243 subsidy per litre provided IPMAN in this report, the nation’s daily commitment would amount to N16 billion daily.
Meanwhile, The Nigerian National Petroleum Corporation, NNPC, has made a N3 trillion demand to the Federal Executive Council, FEC, to cover the payment of petroleum subsidies in 2022. Mrs Zainab Ahmed, the Minister of Finance, Budget, and National Planning, said the FEC had evaluated the proposal for additional cash to enable the government to meet incremental fuel subsidy payments in the 2022 budget. She pointed out that just N443 billion is currently available in the 2022 budget for subsidy payments from January to June. According to the Minister, the NNPC requested N3 trillion from the Ministry of Finance due to the realities on the ground, particularly the current hardship suffered by Nigerians and the lack of mechanisms to enable subsidy reduction. “We don’t want to eliminate subsidies immediately,” Timipre Sylva, Minister of State for Petroleum Resources, indicated. It is for this reason that I am making this announcement. We can see the legal implications as well. The PIA contains a six-month provision that will expire in February, which is why we are stepping out to say that, as I previously stated, we will engage the legislature before that time runs out. “We expect this will go to the legislature, so we’ve filed a bill to alter the law so that we can stay inside the law.” The request was discussed by council, which directed the ministry to seek a change to the budgetary framework and budget from the National Assembly.
These recent developments highlight the FG current stance to no longer embark on the removal of Petroleum subsidy due to it’s impending economic hardship on the masses. However, it’s juxtaposed with the reality of a continuous subsidy regime which due to rising crude prices is now at N16bn per day, these acts for the time being would guarantee some type of stability in terms of prices of Petroleum Products (AGO PMS DPK)
It’s also brings the NNPC, which is scheduled to be a fully PLC by 3rd quarter of these year to demand a N3 trillion to clear 2022 Petroleum Subsidy payments.
Source: Vanguard, Oriental News, Narialand.
