From Uche Usim, Abuja
The Nigerian government is set to cough out additional billions of naira to subsidise the pump price of petrol as crude oil prices rose from $85/barrel on Wednesday to $90 a barrel; the first time since October 2014.
The steady rise in crude prices follows the global lifting of COVID-19-induced lockdowns and shutdowns, just as global supply chains and manufacturing giants roared back to life.
While the current oil price is higher than the $62 per barrel oil benchmark in the 2022 budget signed by President Muhammadu Buhari last December, the unsavoury flipside is that petrol pump price will either go higher to reflect the current market realities or the federal government earmarks more funds to subsidise it.
Nonetheless, Nigeria is expected to earn an extra $28 on every barrel of crude sold but the country’s subsidy shortfall payments will ultimately erode the gains.
A report by the Nigerian National Petroleum Corporation (NNPC) Limited submitted to the Federation Account Allocation Committee (FAAC) in June 2021 indicates that it spent N274.03 billion on petrol subsidy payment between January and May last year.
An analysis of the N274.03 billion shows that the national oil company paid the highest subsidy of N126 billion in May, representing 45.98 per cent of the entire N274.03 billion so far paid by the NNPC this year.
In December 2021, subsidy payment gulped N270 billion, amounting to N1.43 trillion in annual expense, cutting off a chunk of revenue accrued to the federation account.
At 6:15 pm on Wednesday, Brent, the global oil benchmark, climbed 2.30 percent to $90.23 while U.S. West Texas Intermediate (WTI) crude futures also witnessed a corresponding increase of 2.48% to $87.72 a barrel.
This development comes amid rising tensions between Russia and Ukraine, which raised concerns about potential supply disruptions in the global oil market.
United States President Joe Biden had said that he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine.
Last Wednesday, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said the national oil company, NNPC, submitted a bill of N3 trillion to cater for petrol subsidy in 2022.
There have been mixed reactions as to whether to retain or end the subsidy regime.
On Tuesday, the federal government shelved the idea of ending the subsidy regime