Economy

Petrol Subsidy Rises as NNPC Increases Imports by 34%

Published

6 years ago

November 19, 2018

Petrol Subsidy Rises as NNPC Increases Imports by 34%

The Nigerian National Petroleum Corporation has spent more on petrol subsidy this year than it did last year on the back of increased imports and the rally in crude oil prices, ’FEMI ASU writes

The nation imported a total of 15.21 million litres of petrol in the first nine months of this year, up from the 11.33 million litres imported in the same period in 2017.

The NNPC has been the sole importer of petrol into the country for more than a year as private oil marketers stopped importation due to a shortage of foreign exchange and increase in crude oil prices, which made the landing cost of the product higher than the official pump price of N145 per litre.

PMS import, which averaged 56.5 million litres per day in January, jumped to a high of 86.4 million lpd in February, according to data obtained by our correspondent from the Pipelines and Product Marketing Company, a subsidiary of the NNPC.

It stood at 66.8 million lpd in March, 70.7 million lpd in April, 36.7 million lpd in May, and 34.5 million lpd in June. It was 36.5 million lpd in July, 58.4 million lpd in August, and 57.8 million lpd in September.

Analysis of the data obtained by our correspondent from the PPMC and the Department of Petroleum Resources showed that petrol import averaged 55.1 million litres per day in the first nine months of this year, compared to 48.5 million lpd in the same period of last year.

PMS import averaged 49.2 million lpd and 49.8 million lpd in 2015 and 2016 respectively, data from the DPR showed.

The increase in petrol import amid rising crude oil prices in the period under review meant that the NNPC spent more on subsidy.

The Group Managing Director, NNPC, Dr Maikanti Baru, on December 23, 2017 said the Federal Government had been resisting intense pressure to increase the pump price of petrol, noting that the landing cost of the commodity was N171.4 per litre as of December 22, when oil price was around $64 per barrel.

Crude oil price, which accounts for about 80 per cent of the final cost of petrol, rose to a four-year high of $86.74 per barrel early last month.

Using a baseline of N171.4 litre as the landing cost for the 15.21 million litres imported from January to September, it means the NNPC spent more than N395bn on subsidy in the period.

Last month, the Senate initiated a fresh investigation into an alleged illegal subsidy payment on PMS, but the NNPC denied “the insinuation that it has in its custody a $3.5bn subsidy fund.”

The Senate had set up an ad hoc committee to investigate an alleged $3.5bn account kept by the NNPC for petrol subsidy payment.

The corporation noted that it initiated the move to raise a revolving fund of $1.05bn, being the sole importer and supplier of white products in the country, adding that the fund had been domiciled in the Central Bank of Nigeria.

It said, “The fund, dubbed the National Fuel Support Fund, had been jointly managed by the NNPC, the Central Bank of Nigeria, the Federal Ministry of Finance and the Petroleum Products Pricing Regulatory Agency, Office of the Accountant General of the Federation, the Department of Petroleum Resources, and the Petroleum Equalisation Fund.”

The Managing Director, PPMC, Mr Umar Ajiya, in his presentation at an industry event in Lagos this month, said the existence of arbitrage opportunities in neighbouring countries had pushed daily national consumption from less than 35 million lpd to over 55 million lpd .

He said the price of petrol as of June 11, 2018 stood at an equivalent of N367 per litre in Niger; N363.02 in Chad; N328.87 in the Benin Republic; N311.95 in Togo; N378.49 in Ghana, and N401.24 in Cameroun, compared to N145 in Nigeria.

“The arbitrage in the current price of PMS compared to our neighbouring countries has incentivised cross-border smuggling of the product. This increase, together with the rising crude oil price, constitutes a significant drain on our national income,” he added.

The NNPC GMD said in March that the multiplication of filling stations had energised unprecedented cross-border smuggling of petrol to neighbouring countries, making it difficult to sanitise the fuel supply and distribution matrix in Nigeria.

He explained that because of the obvious differential in petrol price between Nigeria and other neighbouring countries, it had become lucrative for the smugglers to use the frontier stations as a veritable conduit for the smuggling of products across the border. He added that this had resulted in a thriving market for Nigerian petrol in Niger Republic, Benin Republic, Cameroon, Chad and Togo as well as Ghana, which has no direct borders with Nigeria.

“The NNPC is concerned that continued cross-border smuggling of petrol will deny Nigerians the benefit of the Federal Government’s benevolence of keeping a fix retail price of N145 per litre despite the increase in PMS open market price above N171 per litre,” he added.

The Federal Government had on May 11, 2016 announced a new petrol price band of N135 to N145 per litre, a move that signalled the end of fuel subsidy.

The media reported on January 15, 2017 that the Federal Government had resorted to subsidy regime following an increase in the landing cost of petrol, with the NNPC bearing the latest subsidy cost on behalf of the government.

The Director-General, Lagos Chamber of Commerce and Industry, Mr Muda Yusuf, said the government should encourage private sector players to take over the downstream sector of the petroleum business.

He said, “When this is done, most of the challenges we see as regards subsidy, refineries and others will be adequately addressed. The government should only play a regulatory and not an operational role.

“Government has no business refining petroleum products, retailing or distributing fuel as well as the marketing of these products. We cannot continue to carry that kind of burden in the oil sector.

“The government should desist from such business because there are more important things to do that have a social impact. Look at our educational system, the health sector, roads, and rail; those are areas the government should channel its attention.”

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Economy

FG to Hike VAT on Luxury Goods by 15%, Exempts Essentials for Vulnerable Nigerians

Published

6 hours ago

October 24, 2024

Bassey Marshall

Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, has announced plans by the Federal Government to raise the Value Added Tax (VAT) on luxury goods by 15% despite the ongoing economic challenges.

Minister Edun made this known in Washington DC, during a meeting with investors as part of the ongoing IMF/ World Bank Annual Forum.

While essential goods consumed by poor and vulnerable Nigerians will not be affected by the increase, Edun, however, the increase in VAT will affect luxury items.

He said, “In terms of VAT, President Bola Tinubu’s commitment is that while implementing difficult and wide-range but necessary reforms, the poorest and most vulnerable will be protected.

The minister also revealed that the bill is currently under review by the National Assembly and in due time, the government will release a list of essential goods exempted from VAT to provide clarity to the public.

“So, the Bills going through the National Assembly in terms of VAT will raise VAT for the wealthy on luxury goods, while at the same time exempting or applying a zero rate to essentials that the poor and average citizens purchase,” Edun explained.

Earlier in October, Investors King reported that the FG had removed VAT on diesel and cooking gas, among others to enhance economic productivity and ease the harsh reality of the current economy.

Economy

Global Debt-to-GDP Ratio Approaching 100%, Rising Above Pandemic Peak

Published

1 day ago

October 23, 2024

Samed Olukoya

The IMF sees countries debt growing above 100% of global GDP, Vitor Gaspar, head of the Fund’s Fiscal Affairs Department said ahead of the launch of the Fiscal Monitor (FM) Wednesday (October 23) in Washington, DC.

“Deficits are high and global public debt is very high and rising. If it continues at the current pace, the global debt-to-GDP ratio will approach 100% by the end of the decade, rising above the pandemic peak,” said Gaspar about the main message from the IMF’s Fiscal Monitor report.

The Fiscal Monitor is highlighting new tools to help policymakers determining the risk of high levels of debt.

“Assessing and managing public debt risks is a major task for policymakers. The Fiscal Monitor makes a major contribution. The Debt at Risk Framework. It considers the distribution of outcomes around the most likely scenario. The analysis in the Fiscal Monitor shows that debt risks are substantially worse than they look from the baseline alone. The framework should help policymakers take preemptive action to avoid the most adverse outcomes.”

Gaspar said that there’s a careful balance between keeping debt lower, versus necessary spending on people, infrastructure and social priorities.

“The Fiscal Monitor identifies three main drivers of debt risks. First, spending pressures from long term underlying trends, but also challenging politics at national, continental and global levels. Second, optimistic bias in debt projections. And third, increasing uncertainty associated with economic, financial and political developments.

Spending pressures from long term underlying trends and from challenging politics at national, continental and global levels. The key is for countries to get started on getting debt under control and to keep at it. Waiting is risky. The longer you wait, the greater the risk the debt becomes unsustainable. At the same time, countries that can afford it should avoid cutting too much, too fast. That would hurt growth and jobs. That is why in many cases we recommend an enduring but gradual fiscal adjustment.”

Economy

IMF Attributes Nigeria’s Economic Downgrade to Inflation, Flooding, and Oil Woes

Published

1 day ago

October 23, 2024

Iyanuoluwa Martins

The International Monetary Fund (IMF) has blamed the downgrade of Nigeria’s economic growth particularly on the effects of recent inflation, flooding and oil production setbacks.

In its World Economic Outlook (WEO) published on Tuesday, the Bretton Wood institution noted that Nigeria’s economy has grown in the last two quarters despite inflation and the weakening of the local currency, however, this could only translate to 2.9 percent in 2024 and 3.2 percent in 2025.

“Nigeria’s economy in the first and second quarter of the year grew by 2.98% and 3.19% respectively amid a surge in inflation and further depreciation of the Naira.

“The GDP growth rate in the first two quarters of 2024 surpassed the figure for 2023, representing resilience despite severe macroeconomic shocks with a spike in petrol prices and a 28-year high inflation rate,” the report seen by Investors King shows.

The spokesperson for IMF’s Research Department, Mr Jean-Marc Natal, said agricultural disruptions caused by severe flooding and security and maintenance issues hampering oil production were key drivers of the revision.

“There has been, over the last year and a half, some progress in the region. You saw, inflation stabilising in some countries, going down even and reaching a level close to the target. So, half of them are still at a large distance from the target, and a third of them are still having double-digit inflation.

“In terms of growth, it’s quite uneven, but it remains too low. The other issue is that in the region it is still high. It has stopped increasing, and in some countries already starting to consolidate, but it’s still too high, and the debt service is, correspondingly, still high in the region,” he said.

It also expects to see some changes in Nigeria’s inflation, which has slowed down in July and August before rising to 32.7 percent in September 2024.

“Nigeria’s inflation rate only began to slow down in July 2024 after 19 months of consistent increase dating back to January 2023.

“However, after two months of slowdown hiatus, inflation continued to rise on the back of an increase in petrol prices by the NNPCL in September,” the report said.