The subsidy on Premium Motor Spirit, popularly known as petrol, may have gulped at least N11.20bn in one week as the rise in global oil prices pushed up the landing cost of the product.
On February 5, when oil price neared $60 per barrel, the expected open market price of petrol rose to over N200 per litre, based on the petrol pricing template of the Petroleum Products Pricing Regulatory Agency.
The product is currently being sold at between N160 and N165 per litre at many filling stations in Lagos.
Using an expected open market price of N190 per litre of petrol and an average current pump price of N162 per litre indicates a subsidy of N28 per litre.
With a daily petrol consumption of about 57 million litres and a subsidy of N28 per litre, it means subsidy gulped N1.60bn in a day and N11.20bn in a week (February 5 to 12).
The media had reported last week that the landing cost of petrol rose to N179.67 per litre on February 5 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.
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.
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, extended its rally on Monday, rising by $0.88 to $63.31 per barrel as of 7:10pm Nigerian time.
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.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, said last week that Nigerians should prepare for the pain associated with the increase in crude oil price.
According to him, as desirable as the increase in oil price is, it has serious consequences as well on petroleum product prices.
“So we want to take the pleasure and we should as a country be ready to take the pain. Today, the NNPC is taking a big hit from this. We all know that there is no provision in the budget for subsidy. So, somewhere down the line, I believe that the NNPC cannot continue to take this blow. There is no way because there is no provision for it.”
“As a country, let us take the benefits of the higher crude oil prices and I hope we will also be ready to take a little pain on the side of higher product prices.”
The NNPC said in its latest monthly report that to ensure continuous increased PMS supply and effective distribution across the country, a total of 1.72 billion litres of PMS, translating to 57.44 million litres per day were supplied in November.
The corporation said it had continued to diligently monitor the daily stock of PMS to achieve smooth distribution of petroleum products and zero fuel queue across the nation.
Okonjo-Iweala, Zainab Ahmed, Others Speaks On Nigeria’s Debt
On Wednesday, the Minister of Finance, Budget and National Planning, Zainab Ahmed, and the Director General of the World Trade Organisation, Dr Ngozi Okonjo-Iweala, differs on experts opinion on the nation’s debt-to-Gross Domestic Product ratio.
Recently, experts have shown continuous concerns on the nation’s endless borrowings and rising debt profile.
The Minister of finance, Ahmed puts the debt-to-GDP ratio at 29 percent, While Okojo-Iweala said it had risen to 35 percent.
Both the minister and the WTO boss spoke at the African Development Bank High-Level Knowledge Event with the theme: ‘From Debt Resolution to Growth: The Road Ahead for Africa’ which held virtually on Wednesday.
Ahmed also disclosed that Nigeria planned to borrow more money to fund its infrastructure capacity.
This is in spite of voices calling on the government to halt borrowing and concentrate on other means of raising funds for the infrastructure needs of the country.
According to the Debt Management Office, Nigeria’s total public debt portfolio rose from N12.12tn in June 2015 to N33.11tn as of March 31.
Ahmed said the government was enforcing fiscal discipline to expand its fiscal space so that it could continue to service its debts and borrow more to build the nation’s infrastructure capacity.
She said, “As of Q1 2021, we have about a 29 percent debt-to-Gross Domestic Product ratio. In terms of the level of debt, we are still very healthy, and sustainable.
“We are struggling with revenues, which is what we need to pay our debts. We have put in place a number of measures to enhance domestic revenue.
“We are cutting costs, we are improving the ease of doing business, trying to leverage private sector resource capacity to invest in infrastructure to reduce government spending.
“We are working on increased transparency in public financial management; we are enforcing fiscal discipline to expand our fiscal space so that we can continue to service our debt and borrow more to build our infrastructure capacity.”
Ahmed also said that the total debt profile did not include that of some states and that the federal government was making moves to correct that.
“In Nigeria, we’ve been making a lot of effort on a quarterly basis to disclose all the debts that we have and to also indicate what the debt service is.
“Currently, we are working on including other state-owned debts that have not been included in public debt for the purpose of transparency. It is important and will help us going forward.”
However, Ngozi Okonjo-Iweala, who also attended the AfDB’s event, differed with Ahmed on the nation’s debt-to-GDP ratio.
The WTO boss who had been Nigeria’s Minister of Finance in the past said the nation’s debt to GDP ratio had risen from 29 percent to 35 percent.
She said, “Middle-income African countries have also seen their debt burdens increase sharply. Amid falling prices and demand for oil worldwide, Nigeria’s debt to GDP ratio rose from 29 to 35 percent; Algeria from 46 to 53 percent, and Egypt from 84 to 90 percent, Angola from 107 to 127 percent.
“Debt to GDP ratios also increased for non-oil exporters including South Africa from 62 to 77 percent. Morocco from 65 to 76 percent.”
Okonjo-Iweala also said that scarce foreign exchange in certain African countries was creating scenarios where the governments were using scarce Forex to fund the fund debt repayment rather than on capital investment.
“Even where debt to GDP or where debt to export ratios was not very high, tighter access to dollar financing because of the COVID-19 crisis means we are already seeing places where scarce foreign exchange is going to fund debt repayment instead of capital investment,” she added.
A professor of economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Sheriffdeen Tella, described as a cause for worry the amount being spent by the government on debt servicing.
He said, “What is important is not even the debt-to-GDP ratio but the ability to pay, and we are presently in serious problem with payments.
“If they want to borrow money from internal sources, that could be understood. But if they are going international again, I think it is not proper because presently the level of international borrowing is what is giving them problem now.
“We are selling oil and making money but we are using that money to service the debts that we owe, and that is unfortunate.
“So, one cannot but be worry. So, the government should think about creating wealth rather than continue borrowing. If they need money badly, they should borrow domestically.”
Prof. Akpan Ekpo told one of our correspondents that there was an urgent need for the government to be more transparent concerning borrowing.
He said, “There is nothing bad in borrowing but you need to borrow to fund infrastructural projects that will pay their way.
“Looking at debt-to-GDP ratio can be quite misleading because we debased our GDP making the denominator very large compared to the numerator. Instead, we should use debt servicing to GDP ratio and debt to revenue ratio, which at the current rates are disturbing.”
Ekpo added, “FG needs to do more feasibility studies on these infrastructural projects before borrowing to fund them.
“Infrastructural projects like power and others have positive multiplier effects in the long run. For the debt acquisition, they also need to be more transparent on it too.”
President of the AfDB, Akinwumi Adesina, said that cumulative total debt in Africa was higher than cumulative government revenue.
According to him, in 2019, Africa’s total outstanding debt was $841.9bn, while total government annual revenue was $501bn.
Adesina said, “Africa’s GDP declined by 2.1 percent in 2021. Growth is projected to recover to 3.4 percent by 2021 and 2022. Africa’s cumulative GDP declined by $145bn to $190bn.
“Millions fell into extreme poverty on the continent. Thirty-nine million Africans could fall into poverty by the end of 2021.”
Adesina said debt-to-GDP ratios on the continent were expected to rise to 10 to 15 percentage points, rising from 60 percent in 2020 to 75 percent in 2021.
He added that as of 2021, 17 out of 38 African countries for which debt sustainability was available were in dire distress.
Twelve countries were at moderate risk of debt distress, while six were already in dire distress, and one country had a low risk of debt distress, he added.
Trade Expert Calls For Increased Investments In AfCFTA to Boost The African Economy
There have been calls for more investments in the African Continental Free Trade Area (AfCFTA) agreement to boost the African economy.
At a recent virtual conference organised by the African Public Relations Association (APRA), an expert on trade and finance, Mr. Jesuseun Fatoyinbo, Head of Trade, Transactional Products and Services at Stanbic IBTC Holdings PLC, highlighted the benefits of increasing investments in the AfCFTA agreement during one of the sessions held as part of the three-day virtual conference.
Jesuseun stated that the AfCFTA agreement will allow African-owned enterprises to enter new markets, expand their customer base and create new commodities and services in the continent. The agreement was created in 2018, and a total of 54 African countries have signed up. Of these, 30 countries have ratified the agreement and 28 countries have deposited their instruments of ratification.
AfCFTA holds great promise for the African economy as it seeks to eliminate tariffs on intra-African trade, making it easier for businesses to trade within Africa and benefit from its emerging markets.
Speaking on the impact of trade on economic development, Jesuseun said: “The status of intra-regional trade within the European, North American and Asian economic corridors is currently estimated at 64 percent, 50 percent and 60 percent respectively.
“However, the status of intra-African trade currently stands at 17 percent, which is significantly lower than other continental regions. This limits business investments within the African continent while increasing trade dependence on foreign markets.” He emphasised the need for improvement in order to expand the African economy.
According to him, increased investments between African countries will trigger trade growth in Africa which will, in turn, promote industrialisation, economic development and subsequently lead to increased employment opportunities across the continent.
Jesuseun advised stakeholders on the need to observe other continental trade trends, as continental trade usually yields positive results. He said, “All sectors need to be involved in AfCFTA to promote industrial development and sustainable socio-economic growth in order to deepen the economic integration of Africa.”
The Stanbic IBTC Head of Trade cited some nations in East Africa which were insulated from economic recession as a result of intra-trade activities. He noted that “despite the severe issues caused by the COVID -19 pandemic in 2020, Tanzania and Ethiopia avoided economic recession, due to their ever-improving trade policies.”
Jesuseun advocated the replication of their strategies across other African nations, to boost Africa’s income and lift millions of Africans out of poverty. Speaking on Stanbic IBTC’s capabilities to boost trade, he said, “Stanbic IBTC is leveraging world-class digital technologies to make commercial imports and exports easier. The organisation is committed to making trade processes seamless and easier with technology.”
The trade expert stated that the pandemic unearthed the possibility of remote verification as against the prevalent practice of physical documentation. He cited examples of African trade’s past experiences, where many trade processes had experienced inefficacies and bottlenecks because of physical documentation.
Jesuseun concluded that trade processes need to be digitized, to enable seamless multilateral trade between African countries. He urged other stakeholders to create awareness about the usefulness of the AfCFTA agreement.
Ogun Records N13.3B Internally Generated Revenue Monthly in Q1 of 2021
Ogun State Government has recorded an average of N13.3billion monthly as Internally Generated Revenue (IGR) in the first quarter of 2021.
The government said it is also planning to raise its yearly Gross Domestic Product (GDP) rate from the current single digit by 25 percent.
The Commissioner for Finance, Dapo Okubadejo disclosed this to newsmen in Abeokuta ahead of the state’s investment summit tagged: ‘OgunIseya21: Becoming Africa’s Model Industrial and Logistics Hub’, slated for July 13th-14th, 2021.
Okubadejo who doubles as the State’s Chief Economic Adviser noted that the state’s IGR had experienced an upward movement after last year’s shortfall due to the Covid-19 pandemic and the attendant lockdown.
“We had a significant turnaround in the first quarter of this year. In fact, as of April, we have done almost N40bn in the Internally Generated Revenue. Our target this year is to exceed all the previous records we have set in IGR. That’s why we have put in place, all these transformation initiatives, friendly policies and also facilitate this investment summit to further showcase Ogun State as the preferred industrial destination,” he said.
The Finance Commissioner was supported in highlighting the investment potentials of the summit by his counterparts from the Ministries of Industry, Trade and Investment, Mrs. Kikelomo Longe; Works and Infrastructure, Ade Adesanya; Culture and Tourism, Toyin Taiwo; Budget and Planning, Olaolu Olabimtan and the Director-General, Public-Private Partnership, Dapo Oduwole.
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