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.
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”.
Economy
Breaking: Tinubu sacks Emefiele as CBN Governor, appoints Cardoso, four other deputies
Cardoso is a former commissioner for budget and economic planning during the first term of Tinubu as the Lagos state governor Lagos.
The statement is titled, ‘President Tinubu nominates new CBN governor and management team for senate screening and confirmation.’
Tinubu also approved the nomination of four new Deputy Governors of the Central Bank of Nigeria, for a term of five years at the first instance, pending their confirmation by the Senate.
They include Mrs. Emem Usoro, Mr. Muhammad Dattijo, Mr. Philip Ikeazor, and Dr. Bala M. Bello.
“In line with President Bola Tinubu’s Renewed Hope agenda, the President expects the above-listed nominees to successfully implement critical reforms at the Central Bank of Nigeria, which will enhance the confidence of Nigerians and international partners in the restructuring of the Nigerian economy toward sustainable growth and prosperity for all,” the statement added
Dr. Yemi Cardoso is a financial and development expert with over thirty years of experience in the private, public and not-for-profit sectors.
He is a member of the Belgian-based Cities Alliance Think Tank which aims to shape and influence policy and decision-making on urban development in Africa and has strong relationships with key international donor agencies.
He has his first degree from the University of Aston, United Kingdom and his second degree from Harvard University, USA.
In 2017, he was awarded an honorary doctorate degree in business administration by his alma mater, Aston University, in recognition of “his outstanding contributions to business and society.
Economy
Customs, 62 government agencies may lose revenue- collection functions to FIRS.
He emphasized that many MDAs, which were not originally designed for revenue collection, have been burdened with this task, diverting their focus from their core functions that are essential for economic facilitation.
“The objective is to enable organizations like Customs to concentrate on trade facilitation and border protection, and regulatory bodies like the Nigerian Communications Commission (NCC) to focus solely on telecommunications regulation.
” This realignment will enhance efficiency, decrease collection costs, and promote transparency in revenue management.”
He acknowledged that there might be resistance from stakeholders who currently benefit from the existing process, but underscored the committee’s intention to ensure that revenues are directed to the government as intended.
Economy
Olawepo- Hashim foresees economic boom under Tinubu’s multi- pronged reform programmes
A stakeholder in Nigeria’s Energy Sector and a former Presidential Candidate, Mr. Gbenga Olawepo-Hashim, has predicted a phenomenal economic rebound in Nigeria owing to the current financial and economic reforms embarked on by the newly inaugurated administration of President Bola Ahmed Tinubu in the past one month.
The 2022 trade surplus of only $2.85 billion dwindles in comparison to 2014’s $54.1 billion.
Also, Foreign Direct Investment (FDI) into Nigeria’s economy fell from $2.2 billion in 2014 to $0.47 billion in 2022, while budget deficit rose by 370.54 percent from 2016 to 2023.
Total public debt as of June 2013 was N7.93 trillion. It’s now at around N77 trillion.
But in the last one month, the President has announced two major economic reforms.
The petrol subsidies, experts agree, have strained Nigeria’s public accounts, contributing to a situation where higher global oil prices hurt, rather than help the economy.
Addressing journalists in Abuja, the nation’s capital on Monday, Olawepo-Hashim noted that the current policy reforms have eliminated distortions in the foreign exchange management on the one hand; and the removal of the corrupt system of oil subsidies on the other hand.
Before now, in Nigeria, there are four foreign exchange (FX) markets: the Interbank FX market, the Investors and Exporters (I&E) window, Bureau De Change (BDC) window, and the Small and Medium Enterprises (SME) window.
However, due to the limited FX supply from exporters and foreign investors, the CBN played a significant role in supplying FX (in this case, USD) to these windows.
Olawepo-Hashim however stated that the policy to unify the exchange windows should have a long-term positive effect on foreign exchange rate and free flow of capital in the country while also yielding a positive impact due to increased confidence in the new government.
According to him, the removal of the subsidies regime in the pricing of Petroleum products is expected to lead to more investment in Mid and Downstream sub sectors of the oil and gas sectors with a net effect of the creation of value-added needed jobs.
He stressed that the new law on decentralization of electricity generation, transmission, and distribution, if properly implemented with concomitant policies, is capable of attracting about 300 billion US dollars over 5 to 7 years into the electricity sector from local and foreign financing sources.
Olawepo-Hashim equally explained that Nigeria per capital comparison with South Africa needs to generate, transmit and distribute about 200,000 MW of electricity, adding that “we can if we stay steadfast to needed reform.
“Nigeria recorded that feat before with liberalization of the telecom sector as she moved from a nation of 400,000 telephone lines in 1999 to a nation of 222 million active lines now.”
While stressing the importance of a naira exchange rate based on market indicators and informed projections to settle around 660 Naira to 1 US Dollar in the exchange market within the next 6 to 9 months, he urged the government to pay attention to immediate deployment of relevant social intervention programmes to cushion the effect of inflation on the burgeoning numbers of the poor.
He also emphasized that “our economic growth expectations must be inclusive and must not leave the majority of our people behind.
“It is a great season of hope and confidence for Nigeria. The nation is steadily on to an assured future as an economic powerhouse and great nation.”
Olawepo-Hashim argued that “Nigeria with the right policy mix will exceed the projection of Price Water Cooper that Nigeria will be the 9th largest economy in the world by 2050 adding that “we are capable of hitting the great economic Milestone predicted by PWC much earlier and climbing higher on the ladder.”
-
Freight Monitor1 month agoFreight Forwarders threaten to shut down ports over alarming rate of extortions by maritime police.
-
Headlines3 months agoMass retirement hits Army, Navy, Air Force as Defence Headquarters issues quit notice to senior officers
-
Customs3 weeks agoShake-up in Customs as Apapa, Tin Can, Seme, KLT commands get new Area Controllers
-
Headlines3 months agoNPA, Shippers’ Council on collision course over dollarisation of barge operations
-
Headlines4 weeks agoToo many people are after my job in NIMASA—-Jamoh cries out, explains reasons for malicious campaign against him
-
Headlines2 months agoFuel price rises as NNPCL adjusts pump price to N568 in Lagos, N617 in Abuja