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Economy

Global oil price surge put pressure on government to remove daily petrol subsidy of N8.28b

 

—-NNPC , PPPRA disagree on exact figures of petrol subsidy.

–as PMS landing cost hits N264.65/Litre

The rapid rise in global oil prices to record highs has pushed the subsidy cost being incurred by the Federal Government to N8.28bn daily.

This has therefore put pressure on the Nigeria National Petroleum Corporation(NNPC) to remove subsidy on the product which analysts said is consuming more than 50 per cent of its remittances to the Federation Account.

The data also revealed that without subsidy, petrol would be selling for about N300 per litre as the landing cost of the product rose to N276.94 per litre last Friday from N249.42 per litre in July 30.

The Economic Confidential had reported on September 28 that the NNPC spent a total of N905.27bn on petrol subsidy from January to August, citing data from the corporation.

The subsidy, which the NNPC prefers to call ‘value shortfall’ or ‘under-recovery, resurfaced in January this year as the government left the pump price of petrol unchanged at N162-N165 per litre despite the increase in oil prices.

President Muhammadu Buhari has said the federal government’s expenses on petrol subsidy has eaten into the revenue that should have been available to fund the 2021 budget.

He spoke on Thursday when he presented the 2022 appropriation bill at the National Assembly.

He said the government was forced to suspend a further increase in the pump price of petrol due to opposition from the labour unions and other stakeholders.

“The National Assembly will recall that in March 2020, the Petroleum Products Pricing Regulatory Agency(PPPRA) announced that the price of petrol would henceforth be determined by market forces.

“However, as the combination of rising crude oil prices and exchange rate combined to push the price above the hitherto regulated price of 145 Naira per litre, opposition against the policy of price deregulation hardened on the part of labour unions in particular.

“Government had to suspend further upward price adjustments while engaging labour on the subject. This petrol subsidy significantly eroded revenues that should have been available to fund the budget”, observed President Buhari.

Responding to an enquiry on whether NNPC would continue to shoulder the financial burden of petrol subsidy, the corporation’s Group General Manager, Group Public Affairs, Garba-Deen Muhammad, replied, “NNPC has made no secret about the burden it is shouldering.”

The Federal Government had in March 2020 removed petrol subsidy after reducing the pump price of the product to N125 per litre from N145 following the crash in oil prices.

The NNPC, which has been the sole importer of petrol into the country in recent years, has been bearing the subsidy cost since it resurfaced.

The price of crude oil, which accounts for a large chunk of the final cost of petrol, has continued to rise in recent months, with Brent, the international oil benchmark, closing at $82.39 on October 8, up from $77.72 on July 30. It increased further to $83.94 per barrel as of 5:05 pm Nigerian time on Monday.

The Petroleum Products Pricing Regulatory Agency(PPPRA) had in March this year released a pricing template that indicated the guiding prices for the month.

The template, which showed that the petrol pump price was expected to range from N209.61 to N212.61 per litre, was greeted with widespread public outcry and was later deleted by the agency from its website.

It was based on an average oil price of $62.22 per barrel, and the landing cost of petrol was put at N189.61 per litre.

Based on the PPPRA template and Platts data, the expected pump price of petrol rose to N299.94 per litre on October 8 from N272.34 per litre on July 30.

The expected retail price of N299.94 per litre and the current pump price of N162 per litre indicate a subsidy of N137.94 per litre as of October 8, compared to N110.34 per litre on July 30.

With daily petrol consumption put at about 60 million litres by the NNPC and a subsidy of N N137.94 per litre, daily subsidy increased to N8.28bn last Friday from N6.62bn on July 30.

The rising price of crude oil pushed the cost of petrol quoted on Platts to $822.75 per metric tonne (N254.25 per litre, using the I&E rate of N414.40/$1) on October 8 from $748.50 per MT (N228.91 per litre) on July 30.

The freight cost increased to $26.77 per MT (N8.27 per litre) last Friday from an average of $21.63 per MT (N6.62 per litre) used by the PPPRA in its March template.

Other cost elements that make up the landing cost include lightering expenses (N4.81), Nigerian Ports Authority charge (N2.49), Nigerian Maritime Administration and Safety Agency charge (N0.23), jetty throughput charge (N1.61), storage charge (N2.58), and financing (N2.17).

The pump price is the sum of the landing cost, wholesale margin (N4.03), admin charge (N1.23), transporters allowance (N3.89), bridging fund (N7.51), marine transport average (N0.15), and retailer margin (N6.19).

While marketers have continued to stress the need to allow market forces to determine the pump price of petrol and do away with subsidy, it remains uncertain whether the discussions between the Federal Government and labour unions will lead to the deregulation of petrol prices.

Meanwhile, both the NNPC and PPPRA have disagreed on the actual amount which the government is pending as a petroleum subsidy.

According to a source in the Petroleum Products Pricing Regulatory Agency (PPPRA), there exists a difference between the agency’s cost and that of the Nigerian National Petroleum Corporation (NNPC).

A subsidiary of the NNPC, the Pipelines and Products Marketing Company(PPMC) is the sole importer of the product.

The NNPC said the source has a higher landing cost than that of the PPPRA. Although the agency had last year announced the deregulation of the product, the Federal Government had recourse to subsidising it when the landing cost became unbearable for the end-users.

The NNPC that termed it under recovery regime has left the pump price at a band between N162 and N165 per litre.

From the PPPRA landing cost of N264.65 per litre, there exists a subsidy or an under-recovery of N102.65 per litre.

In the last few years, many stakeholders within and outside the federal government have called for the scrapping of the subsidy regime for premium motor spirit (PMS), better known as petrol.

Zainab Ahmed, Minister of Finance, Budget and National Planning, in July 2021, advocated the end of fuel subsidy, saying it “costs as much as N150 billion” monthly.

Her comment came four months after Mele Kyari, Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), had said the company “may no longer be in a position” to bear the “subsidy burden”.

 

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Economy

Removal of tariffs on importation of rice, other food items not yet ratified by President Tinubu — Presidency 

The Eyewitness Reporter 
The Presidency has debunked a widely circulated news that President Bola Ahmed Tinubu has granted duty-free importation of some staple food items, including rice.
The presidency officials clarified that the matter is just a proposal to President Tinubu by the economic team as part of the measure to address the food crisis ravaging the country.

A leaked memo which circulated on Monday, July 8th, 2024 had said that the government of President Bola Tinubu was considering suspending tariffs on rice and other food commodities’ imports for 150 days to rein in hunger nationwide.

According to the leaked official document, Abubakar Kyari, minister of agriculture and food security, had in a statement earlier on Monday,  said duties, tariffs and taxes on imported maize, husked brown rice, wheat and cowpeas — through land and sea borders — have been suspended.

Kyari, in the memo, said a 150-day duty-free import window for food commodities will be enforced as part of measures to be implemented over the next 180 days to ameliorate food inflation in Nigeria.

According to him, the measures are part of the accelerated stabilisation and advancement plan recently presented to President Bola Tinubu by the economic management team (EMT) under the Presidential Economic Coordination Council (PECC) constituted by the president in March.

The minister has said in the leaked memo that multiple taxes and levies, infrastructural challenges and “sheer profiteering by marketers and traders” have contributed to rising food prices.

But Presidential spokesman, Bayo Onanuga, who had earlier posted the policy proposal on his official X handle but quickly deleted it a few minutes after later clarified that the memo was already circulating across government departments, but said the policy was not imminent as of Monday evening.
He also noted that the leakage of the memo was a regrettable error.

“The policy was mistakenly circulated,” Onanuga said on Monday evening.

 “We are still deliberating internally from the agric ministry to other agencies on how best to proceed with the policy.”

Onanuga apologised for the error and said the government was not oblivious to its potential impact on long-suffering Nigerians.

The retracted policy draft said the measures would be implemented over the next 150 days and involve relaxing duties, tariffs and taxes on importing certain food commodities through land and sea borders.

It would be recalled that the Tinubu government is facing growing anger among Nigerians over its failure to address endemic food shortages urgently, even as inflation hovered at historically high figures.

On Monday, a frustrated citizen attempted to jump to his death from a 40-metre-high radio transmitter over a worsening economic crisis.

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Economy

How I fought local, international oil mafia that tried to sabotage our refinery project- Dangote

The Eyewitness Reporter 
The Chairman of the Dangote Group, Aliko Dangote has accused those he described as oil mafia of trying to sabotage the refinery project.

Dangote who was speaking at the Afreximbank annual meetings (AAN) and AfriCaribbean Trade and Investment Forum in Nassau, The Bahamas, on Wednesday, said the group he labeled as stronger than the mafia in drug, tried several times to stop the project from becoming a reality.

“Well, I knew that there would be a fight. But I didn’t know that the mafia in oil, they are stronger than the mafia in drugs,” he said.

When asked if the group is local or foreign, he said, “Both. There is a local one and a global one. It is all mixed up. They tried all sorts but you know, I’m a person that has been fighting all my life. So, I think it’s part of my life to fight.”

‘We’ll end up winning’

Despite the battles, Dangote believes victory is assured.

“I think we will end up winning because the population and the government will be on our side because what we are doing is right,” Dangote said during the event.

In January, the Dangote refinery started production in an event the company described as a “big day for Nigeria”.

“Dangote Petroleum Refinery has commenced production of diesel and aviation fuel,” the group said. “This is a big day for Nigeria. We are delighted to have reached this significant milestone.”

The 650,000 barrel-per-day Dangote refinery is expected to be a game changer when fully operational by helping end Nigeria’s reliance on fuel imports.

It sits on 2,635 hectares (6,500 acres) of land at the Lekki Free Zone on the edge of Lagos and costs an estimated $19 billion.

Though one of Africa’s largest oil producers and the continent’s top economy, Nigeria relies almost totally on imported fuel and diesel because of a lack of refining capacity.

The refinery, first scheduled to open in 2021, was officially inaugurated by then-president Muhammadu Buhari last year.

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Economy

Fuel scarcity looms as Oil workers join NLC strike 

Funso Olojo 
There may be yet another disruption in the distribution of the Premium Motor Spirit(PMS) otherwise known as fuel, as the Nigerian Union of Petroleum and Natural Gas Workers(NUPENG) has directed all its members in all the branches of the union nationwide to comply with the indefinite strike action called by the Nigeria Labour Congress(NLC).
It would be recalled that NLC has called out its members and affiliates, including the Trade Union Congress (TUC) on indefinite strike action from today, June 3rd, 2024 over a disagreement on minimum wage with the Federal Government.
In what appears to be solidarity with the NLC, NUPENG has directed all its units nationwide to cease operations and comply with the strike starting from Monday, June 3rd, 2024.
In a circular dated June 1st, 2024, signed by  Comrade Afolabi Olawole, the Secretary General of the Union and addressed to all NUPENG branches and members, the Union instructed all members to immediately put all processes in place to comply with the directive.
”This is to notify all our members and branches in all oil and gas installations, operations and services, including distribution and marketing of petroleum products, that our great Union is fully committed to ensuring total compliance with the directive of Nigeria Labour Congress issued on Friday, 31st, May, 2024 for an indefinite nationwide strike commencing from Monday, 3rd, 2024.
”As a Union, we are deeply concerned and disturbed with the insensitive and irresponsive attitude of the Federal Government to the very critical issue of negotiating a new minimum wage for Nigerian workers in view of the various social-economic policies of this administration that have impoverished the working people of this country.
”Leaders of our great Union at all levels, from the Units, Zones and Branches, should immediately put all processes in place to ensure total compliance with the directive.
”Our solidarity remains constant for the Union makes us strong” the circular, with reference No HQ/Ops/063/2024, said.
Already, Electricity, Judiciary, Medical and Port workers have indicated their resolve to comply with the NLC directive of the strike action
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