Financial Energy Review
……….FG may Review Decision on Suspended Subsidy Removal if Crude Hits Beyond $100 per barrel……..
……….by Jenifer Dike……….
The current surge in the prices of crude oil in the international market has again push up the landing cost of Premium Motor Spirit (PMS) otherwise known as Petrol. The landing cost of pms has now moved from N264.65 to N283. 62 per litre. This no doubt has further put the federal government in dilemma on the choice to suspend petrol subsidy for the next eighteen months.
Industry source said that the federal government may reconsider it’s decision on the suspension of subsidy and reviewed the price of pms if the prices of crude oil go beyond $100 per barrel before the expiration of the eighteen months. However, the leadership of labour union said that though they have also suspended the planned strike over the government suspension of subsidy removal but that the union will not let down guard over any change of decision..
Labour Union said, for now, it plans to continue to engage with the government on the issues of ensuring local refining of petroleum, creation of sustainable jobs and affordable price of petrol for Nigerian workers and people.
Analysts said that the further rise in the landing cost of petrol means increased subsidy as the pump price of the product remains steady at N162-N165 per litre.
The landing cost of the product rose to N282.29 per litre on January 20 as the international oil benchmark, Brent crude, jumped to $89.75 per barrel that day from $77.24 per barrel on December 31, 2021.
Brent rose further on Wednesday to $90.22 per barrel as of 5.19 pm Nigerian time, its highest level since 2014.
The sharp rise in global oil prices to record highs has pushed the subsidy cost being incurred by the Federal Government.
Marketers have increased the price of Automotive Gas Oil, also known as diesel, to N355-N360 per litre. Diesel price in some Petrol outlets in Lagos and Abuja has shot- up to N368 and N372 per litre.
The price of diesel, which has already been deregulated by the government is surging high uncontrollable hitting up to 60 per cent in one year from an average price of N225 per litre in January 2021.
Diesel is mostly used by businesses, especially manufacturers, to power their generators amid a lack of reliable power supply from the national grid. Many vehicles transporting goods and people across the country also use diesel.
Reports have shown that without subsidy, petrol would be selling for about N305.29 per litre as of January 20. This will lead to Nigerian National Petroleum Corporation limited (NNPC) spending more than a total of N1.16tn on petrol subsidy from January to November.
Meanwhile, NNPC has presented a demand of N3 trillion to the Federal Executive Council, FEC to offset 2022 petroleum subsidy payment.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, who made the disclosure said that the FEC considered the request to make additional funding provision to enable the government to meet incremental fuel subsidy payment in the 2022 budget.
She recalled that only N443 billion is presently available in the 2022 budget meant to accommodate subsidy from January to June.
The Minister said with the realities on ground including the present hardship faced by Nigerians and the lack of structures to support subsidy removal, the NNPC made a request for N3 trillion from the Ministry of Finance for 2022.
According to her, “What this means is that we have to make incremental provision of N2.557 trillion to be able to meet subsidy requirement which is averaging about N270 billion per month.”
She said the request was considered by council which directed the ministry to approach the National Assembly for an amendment to the fiscal framework as well as the budget.
Ahmed said the Council has approved an amendment to be transmitted to the National Assembly to repeal clauses 10 and 11 concerning the Economic and Financial Crimes Commission (EFCC) and the Nigerian Financial Intelligence Unit (NFIU) operations in the 2022 budget and as well restore what the lawmakers had deleted amounting to N103 billion.
She further added that the Council approved that the National Assembly should restore the N103 billion slashed from the budget for the provision of critical infrastructure.
To assuage the fears of Nigerians on possible scarcity of petrol NNPC Ltd.has said that it has sufficient volume of petrol to meet domestic needs.
