The increased spending on petrol subsidy is preventing Nigeria from taking advantage of the rise in the price of crude oil to over $100 per barrel, oil marketers said on Friday.
Brent, the crude against which Nigeria’s oil is priced, jumped above $100 per barrel on Thursday, a leap recorded for the first time since 2014, as the invasion of Ukraine by Russian forces heightened anxiety in the global energy space.
The commodity traded at $103.47 per barrel as at 6.58pm Nigerian time on Thursday, moving up by $6.47 or 6.68 per cent, before it later fell to $97.8 per barrel as at 3.40pm on Friday.
Oil sector operators told our correspondent that the increase in crude oil prices would cause a rise in the amount spent by the Nigerian National Petroleum Company Limited as subsidy on petrol.
The NNPC has been the sole supplier of petrol into Nigeria for more than four years and the firm has been subsidising the product as approved by the Federal Government.
“If there is subsidy, there is a dynamics between demand and supply. So, when oil price increases, absolutely refined products’ prices will increase. If oil price comes down, refined products prices will also come down,” the National Secretary, Independent Petroleum Marketers Association of Nigeria, Chief John Kekeocha, said.
He added, “In our present situation, if the price of crude oil is high, it means the government is going to make more money in the sales of crude oil but because of the subsidy that has not been removed, the government is definitely going to subsidise fuel for us to sell at the price we sell now.
“Except the government is trying to sing a new song of increasing petrol price, but I don’t think they can do at this period. So because of petrol subsidy, the much money they make from the sale of crude, they will still use much money to subsidise the refined products imported into Nigeria.”
The IPMAN secretary said Nigeria would not have been shortchanged by the high oil prices if the country’s refineries were functional.
Kekeocha said, “This is why we are crying that this government must do something serious about our refineries. How can we have four refineries and none of them is working? If we were using our refineries to refine the crude and circulate the refined products, it would have been a very good thing to celebrate the rise in oil prices.
“But in this present scenario, Nigeria is shortchanged by humongous fuel subsidy spending amidst the rising crude oil prices. In fact, any time the oil price is getting high, Nigerians will start panicking.
“And this is because the little money we make out of the excess will be used to subsidise products. So you can imagine a whole country like Nigeria bringing in refined products from a small nation such as Belgium. It is an insult.”
He, however, said petrol subsidy would have been stopped if the government had implemented the Petroleum Industry Act in full.
“That is why many Nigerians are interested in this Petroleum Industry Act. If that Act is fully implemented, it means we have said goodbye to petrol subsidy. But because the PIA is not fully implemented that is why we still have petrol subsidy,” Kekeocha added.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, on Thursday, gave another reason why Nigeria could not celebrate the rising prices of crude oil.
He said the country was unable to meet the oil production quota given to it by the Organization of the Petroleum Exporting Countries.
Early this month, OPEC increased Nigeria’s crude oil production target for the month of March, even as the country had been missing its approved monthly output targets.
OPEC raised Nigeria’s oil production target for March 2022 to 1.718 million barrels per day, indicating a marginal increase from the 1.701 million bpd target that was approved for the country in February.
The PUNCH had exclusively reported that Nigeria missed its crude oil output target for January 2022, pumping 1.46 million bpd as against a target of 1.683 million bpd as approved by OPEC.
Speaking in Abuja, Sylva said Nigeria’s low oil production would not make the country take advantage of the rising crude oil prices.
The minister had said, “It is always not something to celebrate because when prices go high, it means other producers will start ramping up their production; for instance, the shale producers in America will now find it profitable.
“Whereas if the prices are at a certain level, it will not be profitable for them to produce their shale. So once oil prices go up to a certain point, you are encouraging a lot of production that would otherwise not be in the market.
“So we are not happy when prices go up to a certain level. We believe that prices should be at a certain point which would be optimal for us, but suboptimal for the shale producers. That is why we like to have that balance.”
Also speaking on the issue, the President, Petroleum Products Retail Outlets owners Association of Nigeria, Billy Gillis-Harry, said petrol subsidy was eroding the gains made from the rise in oil prices.
A recent oil sector report by SB Morgen showed that the amount spent as subsidy on petrol increased by 890 per cent between 2017 and 2021.
In its February 2022 report, entitled ‘Growing fuel subsidy and transport costs: Which way forward, Nigeria?”, the research firm said the NNPC spent N144.53bn, N730.86bn and N551.22bn in 2017, 2018 and 2019 on petrol subsidy respectively. The total subsidy for the five-year period was N4.05tn.
“The amount spent on subsidy is largely a function of the cost of crude oil in the international market. So going by the jump in oil price recently, there will definitely be a rise in fuel subsidy,” the National Public Relations Officer, IPMAN, Chief Ukadike Chinedu. PUNCH