No gain for Nigeria as oil price hits $70 per barrel, revenue shrinks, petrol subsidy rises

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    South Sudan's Minister of Petroleum, Ezekiel Lol Gatkuoth, turns a spigot at an oil well at the Toma South oil field to Heglig, in Ruweng State, South Sudan August 25, 2018. Picture taken August 25, 2018. REUTERS/Jok Solomun - RC1C57D4B180

    …workers, contractors risk delayed pay

    Lower amounts of revenue might be available for sharing by the three tiers of government through the Federation Accounts Allocation Committee (FAAC) in the coming months as the cost borne by the Nigerian National Petroleum Corporation (NNPC) to subsidise petrol has increased by about N17 per litre, Daily Trust reports.

    Subsidy on Premium Motor Spirit (PMS), otherwise called petrol, rose to N38 per litre on Monday, according to figures obtained from the Petroleum Products Pricing Regulatory Agency (PPPRA).

    Subsidy or technically, under-recovery, averaged N21 per litre in December 2019, the data showed.

    The latest increase comes just as oil prices on Monday climbed above $70 a barrel for the first time in four months.

    The rise in the price of oil followed fears that the US airstrike that killed Iran’s top military commander may trigger retaliation and disrupt global oil supplies. Rising tensions between the U.S and Iran have caused considerable turbulence in the oil markets.

    Daily Trust reports that whenever there is a surge in oil price, the expectation is that Nigeria will earn more dollars from crude exports but because the country imports the bulk of petrol it consumes and sells below the market price, NNPC which is the sole importer of the product for Nigeria, incurs billions in subsidy (under-recovery) daily.

    The PPPRA figure showed that PMS landing cost increased from N162.91 per litre in December to N164.13 on Monday just as the open market price for the commodity soared to N183.50 on Monday, compared to N182.28 in December.

    The latest increase shows N38 per litre difference which NNPC currently incurs. PPPRA estimates daily NNPC under-recovery (subsidy) at over N1.2 billion. It means that on a daily basis, over N1.2bn cannot go to the treasury for sharing to all the states.

    Daily Trust reports that heavy subsidy burden in the past have contributed to NNPC’s failure to meet its obligation to FAAC thereby leaving federal and state workers including contractors without salaries or pay for months.

    FAAC is made up of the 36 state commissioners of finance including officials of federal revenue generating agencies who gather in Abuja monthly to share monies earned the previous month.

    The major revenue generating agencies include customs, FIRS and NNPC and remittances by the NNPC form the largest chunk of the monies shared at FAAC but NNPC remits funds only after deducting expenses including subsidy (under-recovery) on petrol.

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    Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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