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Fuel Subsidy Hits N1.7bn/pd, as Oil Price Hovers at $63.1 Per Barrel

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Fuel Subsidy Hits N1.7bn/pd, as Oil Price Hovers at $63.1 Per Barrel

There are indications that despite the implementation of the no subsidy policy by the Federal Government, subsidy obligations of the government may have started mounting with last week’s closing daily figure at about N1.7 billion, or N12 billion during the week.

This follows the huge leap in the international oil price, the benchmark for local petrol price determination. The crude prices closed last week at about $63.14 per barrel in the global market.

On February 5, 2021, when the oil price was nearing $60 per barrel, the expected open market price of petrol rose from N160 to N190 per litre, based on the petrol pricing template of the Petroleum Products Pricing Regulatory Agency, PPPRA.

Since then, the PPPRA, which listed some items, including Administrative charges and Retailers margin at N1.23, and N6.19 respectively, has not released a comprehensive template, capable of guiding stakeholders in the sector.

But a visit to the private depots in Lagos, and its environs, weekend, showed that the landing cost of the product stood at N180 per litre, meaning that the pump price would certainly be in excess of N192 per litre.

However, the product is currently being sold at N162 at many filling stations in Lagos, Abuja, and other cities, although some Independent marketers in the outskirts sold at higher prices across the country.

Based on an expected open market price of N192 per litre of petrol and an average current pump price of N162 per litre, the nation’s petrol subsidy hovers at about N30 per litre.

Nevertheless, with a daily petrol consumption of about 57 million litres, and a subsidy of N30 per litre, the subsidy currently hovers at N1.7 billion daily, and N12 billion weekly.

No price increase — NNPC

However, the Nigerian National Petroleum Corporation, NNPC, apparently the nation’s sole importer, said in spite of the rise in the price of crude, it would not increase the ex-depot price of petrol in February 2021.

In a statement signed by the Group General Manager, Group Public Affairs Division, Dr. Kennie Obateru, the Corporation, stated that the decision was to allow ongoing engagements with organized labour and other stakeholders on an acceptable framework that will not expose the ordinary Nigerian to any hardship, to be concluded.

NNPC urged petroleum products, marketers, not to engage in the hoarding of the product in order not to create artificial scarcity and unnecessary hardship for Nigerians while giving assurance that it has enough stock of petrol to keep the nation well supplied for about 40 days.

Regular monitoring

It further called on relevant regulatory authorities, especially the Department of Petroleum Resources, DPR, to step up monitoring of the activities of marketers with a view to sanctioning those involved in product hoarding or arbitrary increase of pump price.

It would be recalled that the nation’s downstream sector was deregulated in March 2020 with the Minister of State for Petroleum Resources, Chief Timipre Sylva, stating that the prices of petroleum products would be determined by prevailing market forces.

Painful times — Minister of State

Specifically, the Minister of State for Petroleum Resources, Chief Timipre Sylva, had said: “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.”

MOMAN harps on full deregulation

Nevertheless, speaking virtually on, ‘After Deregulation, What Next?’ in Lagos, February 11, 2021, Mr. Adetunji Oyebanji, Chairman, Major Oil Marketers Association of Nigeria, MOMAN, had said: “With a fully deregulated downstream industry, the natural fear and anticipation of Nigerians is the increase in the price of transportation, food items, and the attendant economic hardships. Solutions to these challenges can only emanate from a collective resolve by all stakeholders to face up these challenges together. We must as a national debate and share pragmatic and realistic initiatives to mitigate the impact of a pump price increase that could follow a fully deregulated downstream.

“We stand with Nigeria and Nigerians through this difficult time and support the Federal Government’s promise to pass the Petroleum Industry Bill, PIB this year and fully deregulate the petroleum downstream sector. The benefit of a liberalized downstream is the most visible means of growing the economy in the medium to long term.

“Nigeria can become the refining hub of West and Central Africa and eventually the whole of Africa if we stick to this path of investing in new refineries, adopting a cost optimization initiative, building an environment that promotes competition, and creates a sustainable petroleum sector. These actions would lead to increased employment, reduced poverty, and reduced social inequity. We must take advantage of the opportunities brought by the African Continental Free Trade Area agreement (AfCFTA) and fully benefit from our barrels of crude, getting the maximum value it can bring Nigeria.

“MOMAN is calling for a national discourse among all stakeholders including Government, Labour, Civil Society Organizations, the Organized Private Sector, and Operators, not on the merits or demerits of petrol subsidy removal, but on the initiatives that can be taken to ease the impact of the subsidy removal on the most vulnerable in our society.”

He had also said: “The public, which includes the downstream operators, are key stakeholders in the Nigerian oil and gas industry. We believe that as a country, we have and should move beyond the debate on the arguments for the removal of petrol price subsidies. The discussion we should be having today is how best to maximise the benefits of the removal of price controls and subsidies while minimizing the adverse effects of this action on our citizens.”

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.

Economy

Stop Maize, Soybean Export to Reduce Scarcity – NIAL

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Stop Maize, Soybean Export to Reduce Scarcity – NIAL

The Nigerian Institute of Animal Science on Tuesday called on the Federal Government to halt the continued export of maize and soybean to reduce the scarcity of the commodities as well curb their price hike in Nigeria.

Registrar and Chief Executive Officer, NIAL, Prof. Eustance Iyayi, told journalists in Abuja that the poultry sector was currently hit by the severe scarcity of maize and soybean.

This, he said, was due to the continued export of the commodities, the COVID-19 pandemic, which had disorganised the international supply chain, lingering insecurity in the North-East, farmers/herders conflict and flooding in some parts of the country.

“Maize and soybean are being exported and this has exacerbated the situation leading to local scarcity and price escalation of the commodities in poultry production,” Iyayi stated.

He added, “The increasing prices of the essential commodities has resulted in the increase in price of finished feeds by about 75 per cent.

“This has led to the closure of small and medium sized poultry farms thereby threatening about 10 million jobs as a result of this scarcity.

“To set the poultry industry from total collapse, the institute urges the government to immediately halt the exportation of soybean and maize and grant import permit to importers at the official foreign exchange rate.”

Iyayi said there was shortage of soybean in Nigeria and other countries, stressing that the little amount being produced across the country should not be exported.

He said the current maize yield of about one to two tonnes per hectare being produced in Nigeria would not be enough to sustain the country.

The NIAL helmsman stated that the country should be producing between seven and 10 tonnes per hectare in order to meet the requirements for humans and animals.

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Economy

Petrol Landing Cost Jumps to N186, Oil Hits $64

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Petrol Landing Cost Jumps to N186, Oil Hits $64

Against the backdrop of the rising price of oil prices, the landing cost of Premium Motor Spirit (petrol) imported into Nigeria has increased to N186.33 per litre.

Investors King had exclusively reported on February 9 that the landing cost of PMS rose to about N180 per litre on February 5 from N158.53 per litre on January 7.

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 N186.33 per litre on February 16, with the pump price of the product expected to be N209.33 per litre.

The international oil benchmark, Brent crude, closed at $63.96 per barrel on February 16, up from $59.34 per barrel on February 5.

The rising price of crude oil pushed the cost of petrol quoted on Platts to $560.75 per metric tonne (N163.08 per litre, using N390/$1) on February 16 from $543.25 per metric tonne (N157.99 per litre) on February 5.

Other cost elements that make up the landing cost include freight (N10.29), lightering expenses (N4.57), insurance cost (N0.25), 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 $35.41 per MT (N10.29 per litre) last Wednesday from $30.04 per MT (N8.74 per litre) on February 5.

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).

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

The cost of petrol would be higher if the 410/$1 rate at which the naira closed on Monday at the Investors’ and Exporters’ Foreign Exchange Window was used. The naira closed at 480/$1 at the parallel market.

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.

Oil marketers said recently that they were ready to resume importation of petrol if the foreign exchange was made available to them at a competitive rate.

“The discussion we should be having today is how best to maximise the benefits of the removal of price controls and subsidies while minimising the adverse effects of this action on our citizens,” the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, said at a virtual press briefing.

Brent crude, against which Nigeria’s oil is priced, rose by $1.67 to $64.58 per barrel as of 6:08pm Nigerian time on Monday.

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Economy

FG to Lift 100 Million People Out of Poverty With Gas Expansion Project

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FG to Lift 100 Million People Out of Poverty With Gas Expansion Project

The Federal Government has said about 100 million Nigerians will be lifted out of poverty through the National Gas Expansion Programme (NGEP).

The Minister of State for Petroleum Resources, Chief Timipre Sylva, disclosed this on Monday during the inauguration of the NGEP in Ado Ekiti, Southwest.

Sylva said the project was “a practical demonstration of President Muhammadu Buhari’s commitment to lift 100 million Nigerians out of poverty by using gas value chain as catalyst for social and economic development in Nigeria”.

The minister said, “The programme has its main objective to reinforce and expand gas supply as well as stimulate demand in Nigeria through effective and efficient mobilisation and utilisation of all available assets, resources and infrastructure in the country.

“The programme is geared towards the implementation of Mr President June 12, 2019 promise to take hundred million Nigerians out of poverty within the current decade by ensuring that locally produced, available, accessible and affordable fuel is sufficiently supplied across the country”.

Sylva added that Nigeria was richly endowed with mineral resources, specifically, hydrocarbons, crude oil and natural gas with proven gas reserves of over 200 trillion cubic feet of natural gas, which he said had presented the country with opportunity to use gas as a catalyst for social economy renaissance.

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