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|Rising Crude Price Pushes Petrol Subsidy To ₦16 Billion Per Day by George: 1:28 pm On January 30, 2022
THE price of Nigeria’s Bonny Light, yesterday, surged further to $91.38 per barrel, from $90.31, recorded the previous day, indicating an excess of $29.38 against the $62 per barrel benchmark of the nation’s 2022 budget.
The leap in price was attributed to a combination of factors, including the declining oil inventory, due mainly to rising demand driven by the reopening of businesses after many months of Coronavirus lockdown.
Consequently, Nigeria, which budgeted to produce 1.8 million barrels daily and between 300,000 – 400,000 barrels of Condensate, which also attracts high premium like Bonny Light, expects to generate much revenue into its Excess Crude Account, ECA, a special account established to hold oil revenues in excess of the budgeted benchmark.
Meanwhile, there were fears that the rising crude price could push petrol subsidy to about $16 billion per day.
Prices to rise further -EnergyHub
Speaking to Vanguard, on the developments in the oil market, Lead promoter, EnergyHub Nigeria, Dr Felix Amieyeofori, said: “Inventory is getting lower as the global economy begins to pick up despite the Omicron variant. Already, some major economies are relaxing lockdowns.
“Generally, the global economy will continue to grow in 2022 with increasing vaccinations. That will also increase demands for more energy input. However, 2022 will also see more actions on Net Zero Emission Projects as the Conference of the Parties, COP27, is set to put more commitment and enforcement on Net Zero Emission obligations. Regardless, fossil fuel will continue to drive the global industry in 2022 with prices hedging toward the $100 mark.”
Amieyeofori, who noted that the subsidy decision might have been fueled by political considerations, said: “Nigeria is in an election year with a transition government that would want to keep Aso Rock for the ruling party. A lot of discipline will be required to respect the principles of excess crude account policies. Also, the country continues to rely on external debt which has increasingly taken a toll on our revenue for debt servicing. I do not, therefore, see a ballooning excess crude account in 2022. However, we will see a significant jump in the reserves.
“Well, since we will continue to import, of course, that will significantly impact on the landing cost under a $100/bbl crude price. That will further require a greater subsidy of the product. And given an election year, I see the government playing the ostrich to satisfy the public.
“I would not want to go into an argument with the government because they keep the numbers, however, if we have to jump from 35 million to 60 million to 103 million litres without a significant impact on the economy, then, it is doubtful. This is because of the per capita consumption without equivalent per capita economic growth across the sectors.”
He added: “We should expect most things to be done in the spirit of ‘politicking’. But it is advisable for the government to focus on developing the nation’s economy while providing for the welfare of its citizens.”
Subsidy will swallow oil revenue — IPMAN
Checks by Vanguard showed that the Farouk Ahmed-Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, currently performing the roles of the defunct Petroleum Product Pricing Regulatory Agency, PPPRA, has not been publishing data to guide operations in the domestic market.
But analysts, who spoke with Vanguard said a bulk of the oil revenue would go into funding the nation’s petrol subsidy, which the government has estimated to spend N3 trillion in 2022.
For instance, in an interview with Vanguard, National Operations Controller, Independent Petroleum Marketers Association of Nigeria, IPMAN, Mike Osatuyi, said at the current over $91 per barrel and exchange rate of N575 to a US dollar, the landing cost has
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