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Petrol Landing Cost Rises to N180, Oil Crosses $60

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Petrol - Investors King

Petrol Landing Cost Rises to N180, Oil Crosses $60

The landing cost of Premium Motor Spirit (petrol) imported into the country has risen by 13.34 per cent in one month to about N180 per litre on the back of the increase in global oil prices.

Crude oil price accounts for a large chunk of the final cost of petrol, and the deregulation of petrol price by the Federal Government last year means that the pump price of the product will reflect changes in the international oil market.

Going by the petrol pricing template of the Petroleum Products Pricing Regulatory Agency, the landing cost of petrol rose to N179.67 per litre last Friday from N158.53 per litre on January 7, with the expected open market price (pump price) of the product increasing to N202.67 per litre from N181.53 per litre.

The rising price of crude oil pushed the cost of petrol quoted on Platts to $543.25 per metric tonne (N157.99 per litre, using N390/$1) last Friday from $480.25 per MT (N139.67 per litre) on January 7.

The international oil benchmark, Brent crude, rose to $59.34 per barrel on Friday from $53.70 per barrel on January 7.

Apart from the changes in global crude oil prices, the exchange rate of naira to the dollar also affect the cost of imported petrol.

The devaluation of the naira last year contributed to the significant rise in the landing cost of petrol.

The PPPRA used an exchange rate of N306.90/$1 on January 14, 2020 to calculate the cost of petrol, while N387.63/$1 was used on July 31.

The naira closed at 398.50 against the dollar on Monday at the Investors’ and Exporters’ Foreign Exchange Window, and 480/$1 at the parallel market.

The Central Bank of Nigeria has kept the official exchange rate at N379/$1 since August, when it devalued the naira for the second time in 2020 from N360 per dollar.

Other cost elements that make up the landing cost include freight (N8.74), lightering expenses (N4.57), insurance cost (N0.24), Nigerian Ports Authority charge (N2.38), Nigerian Maritime Administration and Safety Agency charge (N0.23), jetty throughput charge (N1.61), storage charge (N2.58), and financing (N1.33).

The freight cost increased to $30.04 per MT (N8.74 per litre) last Friday from $20.47 per MT (N5.95 per litre) on January 7.

The pump price is the sum of the landing cost, wholesale margin and the distribution margins. The wholesale margin is N4.03 while the distribution margins comprise transporters allowance (N3.89), retailer (N6.19), bridging fund (N7.51), marine transport average (N0.15), and admin charge (N1.23).

The Federal Government announced last week the commencement of discussions with representatives of the labour movement on how to raise the freight rate from N7.51 per litre to N9.11 per litre.

Private oil marketing companies have continued to lament that their inability to access foreign exchange at the official rates has hampered efforts to resume petrol importation.

“The forex problem is real; it is only full deregulation that will allow access to forex. If you look at the prices of diesel and Aviation Turbine Kerosene; those are reflective of the price at which the market is accessing forex,” the Executive Secretary/Chief Executive Officer, Major Oil Marketers Association of Nigeria, Mr Clement Isong, said.

The Nigerian National Petroleum Corporation, which has been the sole importer of petrol into the country in recent years, is still being relied upon by marketers for the supply of the product despite the deregulation of the downstream petroleum sector.

Brent crude extended its rebound on Monday, hitting the $60 per barrel mark for the first since the extent of the COVID-19 pandemic became clear.

The further rise in oil prices comes amid optimism for a vaccine-led economic recovery and a commitment by the Organisation of the Petroleum Exporting Countries and its allies to restrain the supply of crude oil.

Brent, against which Nigeria’s oil is priced, increased by $1.23 to $60.57 per barrel as of 7:03 pm Nigerian time on Monday, its highest level since January 23, 2020.

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

Federal Government to End Petrol Subsidy by June 2022 as World Bank Condemns N2.9 Trillion Funding

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Petrol - Investors King

The Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed, said the Federal Government had made plans for petrol subsidy only up to the end of June 2022.

The minister disclosed this while speaking at the 27th National Economic summit on Monday in Abuja.

She said the Federal Government only factored in subsidy for the first half of the year. In the second half of the year, the Government is looking at complete deregulation of the sector, thereby saving foreign exchange and potentially earning more from the oil and gas industry.

This comes as the World Bank decried the continued spending by the Nigerian Government on petrol subsidy, which it said is on track to gobble up to N2.9 trillion this year. The Country Director for the World Bank in Nigeria, Shubham Chauduri speaking at the National Economic Summit, said the country could channel money being spent on petrol subsidy to primary healthcare, basic education, infrastructure such as rural roads, and industries.

He went on to say that Nigeria is on track to spend N2.9 trillion on Petrol subsidy this year, more that is spent on health in the country, and likened Nigeria to a malnourished individual needing urgent treatment.

He said “I think the urgency of doing something now is because time is going in terms of retaining the hope of young Nigerians in the future and potential of Nigeria. The kinds of things that could be done right away – the petrol subsidy; yes, I hear that six months from now, perhaps with the Petroleum Industry Act coming into effect, it might go away. But the fact is, can Nigeria afford to wait six months? There is a choice being made; N2.9 Trillion to Petrol subsidy which is depriving states of much-needed revenue to invest in basic services.

Meanwhile, the Chairman of the President Economic Advisory Council, Prof Doyin Salami, said he had argued for a very long time that petrol subsidy needs to go.

A petrol subsidy is a program in which the Government or any other organization pays for a portion of gasoline, heating oil, or some other fuel. Nigeria is the biggest producer of crude oil in Africa but still needs to import Petrol, this situation made subsidizing petrol necessary as the exchange rate in which it is being imported puts the price out of the reach of the average consumer.

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Economy

FIRS Proposes Road Infrastructure Tax

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Federal Inland Revenue Service- Investorsking

The Federal Inland Revenue Service (FIRS) says it is proposing the introduction of Road Infrastructure Tax in Nigeria, to make the informal sector contribute to building a modern society.

The Executive Chairman of the FIRS, Muhammad Nami, disclosed this on Thursday while receiving a delegation of the Nigeria Union of Journalists (NUJ) led by its National President, Chris Isiguzo, in his office, in Abuja.

Mr. Nami reportedly said the proposed Road Infrastructure Tax, to be administered by FIRS, will provide the government with adequate funding for road construction, rehabilitation, and maintenance, as well as providing the needed security for roads in the country.

According to the FIRS Executive Chairman, “The only way to make the informal sector contribute to building a modern society is by making them pay when they use the roads.” He stated.

“That is why we are proposing that government should consider introducing Road Infrastructure Tax in Nigeria.“

He noted that “in many jurisdictions, road users pay for the use of road infrastructure as such it shouldn’t be seen as an additional burden on our citizens because it has the potential of making life better for all of us.”

Speaking further, Mr Nami stated that Nigeria’s economy presently relies heavily on non-oil revenues to discharge its statutory responsibility of paying salaries and providing social amenities to the citizenry.

“Without the tax that you pay governments at all levels would not be able to fulfill their mandate to the electorates. Tax money also helps to ensure the roads you travel are safe and always in good condition,” he said.

Mr. Nami also stated that despite sharp practices by some companies who were in the habit of evading taxes, by shifting their capital and profits to tax havens, as well as low revenue from Petroleum Profit Tax, due to the shortfall in crude oil production among other factors, the FIRS has been putting forward critical reforms that have been yielding positive impact on the Service’s operations.

“Adopting technology in tax administration is crucial in improving domestic revenue mobilization in view of dwindling oil prices in order to avoid falling into a debt crisis. It is against this backdrop that the TaxPro-Max became the channel for filing Naira-denominated tax returns effectively from 7th June 2021.

“The TaxPro-Max enables seamless registration, filing of returns, payment of taxes and automatic credit of withholding tax as well as other credits to the Taxpayer’s accounts among other features. The technology also provides a single-view to Taxpayers for all transactions with the Service,” Mr. Nami explained.

The tax agency official also noted that the management of the Service had established two critical units, the Intelligence, Strategic Data Mining & Analysis Department (ISDMA) and the Tax Incentive Management Department (TIMD) as part of institutional reforms to generate more revenue and forestall revenue leakages.

“While the TaxProMax will serve as the flagship tool for mining data, it will be complemented by other tools that the Intelligence, Strategic Data Mining and Analysis Department department may deploy, with the data engineers in the Department carrying out necessary distillations.

“Management also established the Tax Incentive Management Department to manage, implement and report on tax incentives as provided by relevant extant laws and regulations. The TIMD is specifically in charge of the tax affairs of companies/enterprises enjoying tax exemptions and holidays. Companies enjoying Pioneer incentives, Non-Governmental Organizations (NGOs), Cooperative Societies, companies in Export Processing Zones (EPZ), Free Trade Zones (FTZ), Oil and Gas Export Processing Zones (OGEFZ), those engaged in Downstream Gas Utilization and all others enjoying tax holidays are being managed by the TIMD to forestall revenue leakages, such that these companies/enterprises do not use their status as a cover to earn taxable income and refuse to pay tax on such income,” the FIRS chief said.

He added that the service created 10 Value Added Tax (VAT) Regional Coordination Offices across the country to drive the collection of VAT.

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COVID-19 Has Permanently Lowered Path of Real GDP in sub-Saharan Africa – IMF

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Institute of Chartered Shipbrokers

The IMF is predicting that the pandemic has permanently lowered the path of real GDP in sub-Saharan Africa, suggesting a loss of real per capita output of close to 5.6 percent in the latest issue of the sub-Saharan Africa Regional Economic Outlook report released Thursday (October 21) in Washington, D.C.  

“We estimate that sub-Saharan Africa’s economy will grow by 3.7 percent this year and 3.8 percent in 2022. The recovery is being supported by favorable external conditions on trade and commodity prices. It has also benefited from improved harvests and increased agricultural production in a number of countries. And the recovery, of course, follows the sharp contraction in 2020 and is, of course, very much welcome,” said Abebe Aemro Selassie, head of IMF’s African Department.

The region is on a different recovery path from much of the world. Such global divergence, which is expected to persist over the medium term, reflects sub-Saharan Africa’s slow vaccine rollout and stark differences in policy space.

Sub-Saharan Africa has been hit by a third wave of the pandemic, this time with the more contagious Delta variant, with infection rates often rising to triple, quadruple the rates seen in earlier waves. Thankfully, this wave has now eased over the past months or so, but there is little reason to believe that there won’t be repeated waves going forward. This is also because vaccination efforts in sub-Saharan Africa have been slower than other regions due mostly to stockpiling by advanced countries, export restrictions by major vaccine manufacturing countries, and additional demands for booster shots that we’re seeing in advanced economies that could further compromise supply. At the moment, only around 3 percent of the population in sub-Saharan Africa has been fully vaccinated, in sharp contrast to most advanced economies that are close to the 60 percent or more level of vaccination,” explained Selassie.

The region’s recovery remains highly vulnerable to changes in the global outlook, including a tightening of global financial conditions.

Policymakers in sub-Saharan Africa need to navigate an increasingly difficult and complex policy environment. Against the backdrop of a context of weaker than expected growth, policymakers need to navigate among three formidable pressures, pressing spending needs to address the many social and human capital and infrastructure needs they face, limited borrowing capacity given the already high public debt levels in most cases, and the time consuming and politically difficult nature of mobilizing tax revenues. How deftly countries navigate this trilemma, as we’ve been calling it, will have a huge bearing on macroeconomic wellbeing of countries as well as economic growth prospects,” said Selassie.

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