The Federal Government’s expenditure on oil subsidy is to record a sharp rise as oil prices surged yesterday with brent crude hitting $90.02 as at 19.30 Nigerian time. The highest since 2014.
The development comes amid a N3 trillion subsidy bill presented to the Federal Executive Council (FEC) yesterday by the Nigerian National Petroleum Corporation (NNPC) to cover fuel subsides, hitherto expected to end by June but now recommended for an 18-month extension.
The $90.2 per barrel oil price is $28.2 higher than the $62 per barrel as captured in the 2022 budget oil price benchmark.
Stakeholders had expressed concern that the 18-month Petroleum Industry Act (PIA) implementation extension by the Federal Government would cost the country about N2 trillion in fuel subsidy.
Brent crude oil prices rose on Wednesday to $90 a barrel, as low cushing and distillate inventories combine with supply jitters in Europe, Russia-Ukraine tensions, and falling Russian seaborne crude imports from the Baltics.
As at 11:00 a.m. EST on Wednesday, even after the weekly U.S. inventory report from the EIA showed a build in crude oil inventories, WTI Crude prices were up 1.96 per cent at $87.27, while Brent Crude briefly hit $90, up nearly 2 per cent on the day.
Brent crude hit the highest level since 2014 as inventories at the Cushing hub in Oklahoma, the delivery point for WTI, sunk by another million barrels on Tuesday, according to API data, to the lowest point since 2012—more than 30 per cent below the five-year average.