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FG Considers Further Review of Petrol Template

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  • FG Considers Further Review of Petrol Pricing Template

The Federal Government has said it would further review its pricing template for petrol with the aim of removing several multi-layered charges and costs that affect the pump price of petrol at service stations across the country.

The government also said it would continue to work with the Central Bank of Nigeria (CBN) to find ways of providing subsidised foreign exchange interventions for oil marketers in the country.

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, stated this saturday in a podcast he shared in his social media accounts. The podcast obtained was centred on the challenges of the country’s downstream petroleum sector and the government’s plans to overcome them.

Kachikwu stated in the podcast that, at the moment, the Nigerian National Petroleum Corporation (NNPC) was importing almost all the petrol used in the country, a responsibility he stated the corporation was undertaking at a huge cost.

According to him, marketers in the country were no longer importing petroleum products because of the unfavourable business fundamentals which had been influenced by the rising prices of crude oil.

“Downstream continues to be an area that has numerous challenges, that is why throwing ideas on them will continue to be something that any minister or chief executive of NNPC will continue to focus on,” said Kachikwu.

He further stated: “The environment has since changed, when we did all these, pricing for crude was more in the $25 to $30 per barrel, today it is in excess of $54, which is fantastic because it means that our revenue stream is improving.

“But, it is a twin window, whenever the price of crude goes up, obviously the price of refined petrol goes up and we begin to have systemic challenge in terms of the pricing on the local base, so that gap has begun to return and today what you find is that the NNPC continues to import massively on behalf of the Federal Government. It has gone back to about 90-95 per cent for the whole country and therefore its books are absorbing some of the cost implications of this.”

According to him: “The second is that once this happens the marketers begin to shift backwards, participation by individual marketers to help us continue the normal business and marketing cycle that should be what you expect is no longer existing. Most of them are not importing.”

Speaking on plans to stem the development, Kachikwu stated: “One of the things we are doing is that we are looking at our existing templating position, and what we are doing with that is first addressing some of the soft end of things that affect pricing.

“We are removing too many multi-layered charges on importation, we are working with the ministry of transport to reduce those to what was initially approve by the president, and as such, we should take away a good chunk of the expenses. We are working to see how the CBN can provide us with a fairly subsidised FX for products priced in dollars.”

Though he did not expressly disclose this, the minister however, hinted that the government might begin to wind down the operations of the Petroleum Equalisation Fund (PEF) and transfer its bridging responsibilities to oil marketers.

According to him, “We are trying to see how over a period of time, marketers will take over the PEF responsibilities of funding trucking and keeping prices stable across the country.”

He said in the long run, the NNPC would have to reduce its presence in the country’s petroleum downstream sector because of the cost on its books. The corporation, he noted, would have to begin to operate as a profit entity.

Speaking on product availability in the country, Kachikwu assured that, “There isn’t fuel scarcity, we are not short of products, but yet the downstream and midstream sectors continue to remain challenged. And what we are going to do is to analyse what we have done so far and begin to throw solutions to some of these challenges.”

He also explained that since the introduction of pricing modulation, the country has been able to drop its daily products consumption from about 50 million litres to 37 million litres.

“We had issues of pricing efficiency and governance, for at that time the prices we were selling at were so ridiculously below what the sustainable prices are. And you find a situation where basically marketers disappeared from the industry. So, we had massive shortages, queues and everything seem to be breaking down. We’ve since come out from that.

“First we’ve moved from a fully subsidy-based sector to a partially liberalised sector. I say partially because we haven’t quite achieved the template to have a fully liberalised sector. What that has done for us is that it had reduced consumption from 50 million litres to 37 million litres a day,” he stated.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Economy

World Bank Lauds Kogi’s 2020 Financial Statement

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The World Bank has heaped praise on the Government of Kogi State concerning the state’s audited financial statement for 2020. The financial institution was said to have described the financial report as a standard to look up to concerning transparency and accountability in the public sector.

In a statement which was dated November 21, 2021 it was said that the bank made the commendation in a letter which was sent to the Accountant General of the state.

As said in the statement, the letter which was taken by the Kogi State Accountant General on November 2025 was signed by Deborah Hannah Isser, the Task Team Leader of the States Fiscal Transparency, Accountability and Sustainability Programme (SFTAS), Nigeria Country Office, Western and Central African Region.

SFTAS is a $750 million programme which has been set up to reward states for meeting any or every one of the indicators which demonstrate improvements in fiscal transparency, sustainability and accountability.

The indicators, which are nine in number were a byproduct of the former Fiscal Sustainability Plan of the federal government where States would be rewarded for meeting up to 22 targets.

The World Bank had previously backed the federal government to give incentives to the states in order to properly execute the 22-point Fiscal Sustainability Plan, which has now gone under a revamp as the nine Disbursement Linked Indicators under SFTAS.

Some of the criteria on which judgement will be based on are: improvement in financial reporting and budget reliability, improved cash management, increased openness, citizen participation in the budget process, reduced revenue leakages through the execution of State Treasury Single Account (TSA), a strengthened Internally Generated Revenue (IGR) collection, biometric registration and Bank Verification Number (BVN) used to reduce payroll fraud.

The World Bank commended the Kogi State government for preparing its audited financial statements in line with the basis of the International Public Sector Accounting Standards.

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Economy

Nigeria’s Rigid Forex Policy Discouraging Investors, Fueling Inflation – World Bank

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The World Bank has blamed the Central Bank of Nigeria’s rigid forex policy for the drop in Nigeria’s capital importation and rising inflation rate.

The bank disclosed in its November report, Nigeria Development Update.

Explaining modalities for its position, the World Bank stated that there had been constant pressure on the Nigerian Naira with the current forex policy, forcing the central bank to consistently increase its nominal official exchange rate in an effort to ease some of the pressure.

This, it blamed on the rigid foreign exchange management system of the Central Bank of Nigeria, saying the system has also been responsible for the rising inflation rate in Nigeria.

The report read in part, “The government’s exchange rate management policies continue to discourage investment and fuel inflation. Exchange rate stability is a key CBN policy objective, and to preserve its external reserves the CBN continues to manage FX demand and limit the supply of FX to the market.

“Pressure on the naira remains intense, and while the CBN has raised the nominal official exchange rate three times since the start of the pandemic (by 15 per cent in March 2020, five per cent in August 2020, and seven per cent in May 2021), FX management remains too rigid to respond to external shocks. Meanwhile, exchange-rate management has emerged as one of the key drivers of inflation.”

The World Bank further stated that the central bank foreign exchange system needs to be more flexible to withstand external shocks, especially given Nigeria’s mono-product nature. It added that the NAFEX rate does not reflect the true market rate but the central bank managed rate.

It read in part, “While the CBN supplied an average of $2.5bn to the Investors and Exporters forex window in the months just prior to the COVID-19 crisis, it only supplied an average of $0.5bn in the months thereafter.

“The NAFEX rate, which is now the guiding exchange rate for the economy, continues to be managed and is not fully reflective of market conditions. The parallel market premium over the NAFEX rate reached 29 per cent in August 2021 after the CBN cut off its weekly supply of $20,000 per bureau de change. The CBN has intermittently supplied forex to BDCs since 2005, providing ample opportunities for currency round-tripping.”

The institution however advised that Nigeria adopt a more predictable, transparent and flexible foreign exchange management system in order to attract and sustain private investment flows.

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Economy

Nigeria’s Non-oil Revenue Now N1.15 Trillion – Minister of Finance

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Mrs. Zainab Ahmed, the Minister of Finance, Budget and National Planning, has said that Nigeria’s non-oil revenue is now N1.15 trillion, representing 15.7 percent above the country’s target. This, she claimed, was a result of the federal government’s efforts at diversifying the nation’s economy.

Mrs. Ahmed disclosed this at the Institute of Directors (IoD) 2021 Annual Directors Conference which was held on Wednesday in Abuja.

According to the News Agency of Nigeria (NAN) the event with the theme: “Creating the Future: Deepening the Corporate Governance Practice through Multi-Sectoral and Multi-Generational Collaborations,” was meant to discuss economic development.

Mrs Ahmed added that the recent development was in line with President’s commitment to further diversifying the Nigerian economy which is heavily dependent on oil. She observed that Nigeria was showing resilience in recovery from recession from coronavirus (COVID-19) pandemic which intensely affected global economies.

The minister said the federal government alongside the private sector had implemented a wide range of monetary measures to stimulate economic recovery, growth and development, job creation and improved standards of living.

She also explained that the government was doing everything to improve and diversify Nigeria’s revenue generation.

Nigeria was quickly able to exit recession and is on her way to path of sustainable growth and we are intensifying efforts to grow and diversify our revenue sources to grow revenue from the current 8 per cent.”

“Our non-oil revenues have grown to N1.15 trillion, representing 15.7 per cent above set target. We are working on the 2021 finance bill and it’s nearing completion. Also, the recent approval of the medium-term national development plan is an important milestone of Buhari’s commitment to delivering sustainable growth and we require strong support and monitoring during implementation,” she said.

Mrs Ahmed reinforced the government’s decision to do something about infrastructure and reduce the cost of production for businesses in the country.

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