Economy

Upsurge in oil prices boosts Nigeria’s revenue above budget estimates

Tunde Ayodele

The upsurge in the prices of the international oil benchmark, Brent crude, has pushed Nigeria’s oil revenue above the estimate in the 2021 budget.

Brent, against which the country’s crude oil is priced, has been trading more than $20 higher than the Federal Government’s benchmark for this year’s budget in recent months.

The 2021 budget, which was signed by President Muhammadu Buhari, on December 31, was based on an oil price benchmark of $40 per barrel and a production level of 1.86 million barrels per day.

According to the budget, 30 per cent (N2.01tn) of projected revenues is to come from oil-related sources while 70 per cent is to be earned from non-oil sources.

Brent crude, which closed at $51.22 per barrel in December, reached the $60 per barrel mark in February and rose further to as high as $70 per barrel before paring some of its gains. It closed at $64.86 per barrel on Thursday.

For Nigeria, which relies on crude oil for about 50 per cent of government revenues and over 90 per cent of export earnings, rising oil price means increased revenue.

On the other hand, rising oil price also translates to increased cost of petroleum products as the country depends heavily on imports due to lack of domestic refining.

Using an average price of $60 per barrel and a production level of 1.42 million barrels per day, the country’s total oil revenue stood at $2.39bn in February, compared to a budgeted revenue of $2.08billion.

The Organisation of the Petroleum Exporting Countries (OPEC), in its monthly oil market report for March, said the country’s oil production rose by 63,000 barrels to 1.42 million bpd in February, based on direct communication.

“Crude oil output increased mainly in Nigeria, Iraq, Iran IR, Venezuela and Libya, while production decreased primarily in Saudi Arabia and Angola,” the 13-member group said.

OPEC had in February said the rise in global oil prices could brighten Nigeria’s outlook this year.

Economy

Dangote refinery may not sell its fuel below N900 per litre.

Funso OLOJO

Nigerians who have been banking on cheaper fuel from Dangote Refinery may be disappointed as it may not sell the product below the benchmark price of N855 to N890 per litre set by the Nigerian National Petroleum Corporation Limited (NNPCL).

Following its admittance of cash crunch and its inability to sustain uninterrupted fuel supply at the current rate of N560 per litre it hitherto dispensed at its mega stations, the NNPCL has jerked up the price of Premium Motor Spirit(PMS) otherwise known as fuel to N855 per litre in Lagos and N890 per litre in Abuja.

As the sole importer of fuel, the independent marketers took a cue from the NNPCL to hike their own price to between N1,000 to N 1,300.

However, the national oil company said the new fuel price for fuel was dictated by market forces and global trend in oil sales.

Consequently, the corporation said all local refineries, including Dangote Refinery, will sell by the dictates of the market forces.

In its reaction to the allegation made by a religious organization, Muslim Rights Concern, (MURIC), which claims that the Dangote Refinery Limited (DRL) is being undermined by actions of the Nigerian National Petroleum Company Limited (NNPC Ltd), the cooperation reiterated its earlier position of a deregulated downstream sector.

According to Olufemi Soneye, the Chief Corporate Communications Officer of the NNPCL in a statement, MURIC asserts that recent changes to the pump price of Premium Motor Spirit (PMS) will prevent the Dangote Refinery from offering lower prices and that NNPC Ltd. has become the sole off-taker of all products from the refinery.

However, the national oil company declared that the pricing of petroleum products from any refinery, including the Dangote Refinery Ltd. (DRL), is determined by global market forces.

“The recent changes in PMS prices have no impact on the DRL or any other domestic refinery’s access to the Nigerian market.

“In fact, if current prices are perceived as high, it presents an ideal opportunity for the refinery to sell its products at lower prices in the Nigerian market.

” Furthermore, we emphasize that there is no guarantee of lower prices associated with domestic refining compared to any global parity pricing framework, as confirmed by the DRL.

“The NNPC Ltd will only fully offtake PMS from the DRL if the market prices of PMS are higher than the pump prices in Nigeria.

” The DRL and any other domestic refinery are free to sell directly to any marketer on a willing buyer, willing seller basis, which is the current practice for all fully deregulated products.

“NNPC Ltd. has no desire or intention to become the distributor for any entity in a free market environment, and therefore, the notion of becoming a sole off-taker does not arise” the NNPCL declared.

Economy

Tinubu defends fuel price hike, says hard decisions necessary to reposition Nigeria’s economy.

Funso OLOJO

Despite Nigerians’ outrage and anguish over the recent fuel price hike, President Bola Ahmed Tinubu has defended the decision of the Nigerian National Petroleum Corporation Limited (NNPCL) to raise the pump prices of Premium Motor Spirit (PMS), otherwise known as petrol.

It could be recalled that the NNPCL, following its admittance of cash crush to sustain uninterrupted fuel supply due to its debt burden of $3 billion owed its foreign suppliers, had on Wednesday, September 3rd, 2024, surreptitiously increased the pump price of fuel from N560 per litre to N855 per litre in Lagos and N890 per litre in Abuja.

While the independent marketers sell at between N1000 to N1100 per litre.

However, President Tinubu, while defending the price hike said the action is necessary to put Nigeria on the path of greatness.

While addressing Nigerian residents in China on Friday, September 6th, 2024, Tinubu said the price hike was part of the hard and bold decisions his government must take to give a good life to Nigerians.

Tinubu travelled to the East Asian country on Sunday for a five-day state visit, where he also participated in the 2024 Summit of the Forum on China-Africa Cooperation (FOCAC).

While addressing the Nigerian community in China, the President spoke of his administration’s reforms, including the deregulation of the petroleum downstream sector.

He said the hike in the pump price of fuel and other decisions by his government are part of an overall strategy to get Nigeria out of the doldrum and place it on the growth trajectory.

“Nigeria is going through reforms, and we are taking very bold and unprecedented decisions.

” For example, you might have been hearing from home in the last few days about fuel prices.”

“What is the critical part to get us there if we cannot take hard decisions to pave the way for a country that is blessed and so talented?

“The more you want everything free, it will become more expensive and long-delayed to achieve meaningful development,” Presidential spokesman, Ajuri Ngelale, quoted Tinubu as saying.

Tinubu defended the national oil company’s decision, noting that hard decisions are crucial to economic prosperity.

“But, can we help it? Can we develop good roads like you have here? You see electricity being constant in quantity and quality.

” You see water supply, constant and running, and you see their good schools. And we say we want to hand over a banner without stain to our children?

“So many of you are so talented, speaking very fluent Mandarin. It is what you contribute and tell them at home that will reflect in the attitude of our people,” he said.

The President noted that while it’s not always easy for a leader to have a national consensus on issues, he is ready to take the hard decisions to move the nation forward.

“We are focused, and I have a very good team,” Tinubu boasted.

However, the President’s justification for the latest fuel price hike was a breach of the promise he made to Nigerians in August 2023 that there would be no fuel price increase again.

According to the President’s Media Aide, Ajuri Ngelale, President Tinubu had in 2023 said although there were still inefficiencies in the midstream and downstream sector of the petroleum industry, he however promised Nigerians would no longer be burdened by another price hike.

“President wishes to assure Nigerians, following the announcements by the Nigerian National Petroleum Company Limited (NNPC), just yesterday (August 14th, 2023, that there will be no increase in the pump price of petroleum motor spirit anywhere in the country,” the spokesperson said.

“We repeat, the president affirms that there will be no increase in the pump price of petroleum motor spirit.”, Ngelale had quoted President Tinubu in 2023.

A year later, both President Tinubu and the NNPCL reneged on their promise not to increase fuel prices.

Economy

PMS prices now determined by market forces, petroleum industry now fully deregulated –NNPCL

Funso OLOJO

The Nigerian National Petroleum Company Limited (NNPC Ltd. has disclosed that the corporation no longer fixes prices of fuel as this is now determined by market forces.

In a statement signed by Olufemi Soneye, the Chief Corporate Communications Officer of the national oil company, the corporation noted that foreign exchange (forex) illiquidity has been a significant factor influencing the fluctuation in prices of Premium Motor Spirit (PMS), which are governed by unrestricted free market forces, as provided for in the Petroleum Industry Act (PIA), 2021.

Speaking on a live television broadcast Thursday, September 5th, 2024, the Executive Vice President of Downstream, NNPC Ltd., Mr. Adedapo Segun, explained that the current fuel scarcity was expected to “subside in a few days as more stations recalibrate and begin selling PMS.”

He said Section 205 of the PIA, which established NNPC Ltd., stipulated that petroleum prices were determined by unrestricted free market forces.

According to him, “The market has been deregulated, meaning that petrol prices are now determined by market forces rather than by the government or NNPC Ltd.

” Additionally, the exchange rate plays a significant role in influencing these prices.”

On the commencement of lifting PMS from the Dangote Refinery, Segun said that NNPC Ltd. was awaiting the September 15th timeline provided by the Refinery.

Segun, who said no right-thinking individual would be comfortable with the current fuel scarcity, added that the NNPC Ltd. has nearly a thousand filling stations nationwide and was collaborating with marketers to “ensure that stations open early, close late, in order to maintain adequate fuel supply to meet the needs of Nigerians.”

He assured Nigerians: “We are also engaging relevant authorities to ensure product diversions are prevented and timely deliveries to all stations are ensured.

“The scarcity should ease in the next few days as more stations recalibrate and begin operations.” the NNPCL chief assured.