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Petrol Subsidy Rises as NNPC Increases Imports by 34%

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  • 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.”

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 long experience in the global financial market.

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Economy

Lagos Lowers Land Use Charges, Waives N5.75bn in Penal Fees

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Lagos Reduces Land Use Charges to Pre-2018 Fees

In a bid to ease economic burden and support growth across Lagos State, the commercial hub of Nigeria, the state government has reduced land use charges and other penal fees.

Dr. Rabiu Olowo, the Commissioner for Finance, disclosed this on Wednesday in a statement titled ‘Speech delivered by the honourable commissioner for finance at a press briefing on the 2020 new land use charge law.’

Lagos State Government said land use charges and other fees are revised down to pre-2018, adding that the state will henceforth uphold the 2018 method of valuation.

Accordingly, the state waived the penal fees for 2017, 2018 and 2019. Translating to N5.75 billion in potential revenue.

“In addition to this, there is also a 48 per cent reduction in the annual charge rates,” Olowo stated.

He further stated that owner-occupied residential property was lowered from 0.076 per cent to 0.0394 per cent; industrial premises of manufacturing concerns, from 0.256 per cent to 0.132 per cent; and residential property/private school (owner and third party, from 0.256 per cent to 0.132 per cent.

Olowo added that commercial property — used by the occupier for business purposes — was reduced from 0.76 per cent to 0.394 per cent; and vacant properties and open empty land, from 0.076 per cent to 0.0394 per cent.

While the annual charge rate for agricultural land was revised down by 87 per cent from 0.076 per cent to 0.01 per cent.

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FG Spends N2.37 Trillion on Petrol Importation in 13 Months, Says NNPC

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NNPC Sells 950.67m Litres of Petrol In May

The Federal Government imported petrol valued at N2.37 trillion into the country in thirteen months, according to the Nigerian National Petroleum Corporation (NNPC).

On Wednesday, the corporation said revenue from the sales of white products stood at N2.39 trillion between May 2019 and May 2020.

It, therefore, stated that petrol contributed about 98.84 percent or N2.37 trillion of the total sales generated during the period.

In May, the corporation said it realised N92.58 billion from the sale of petrol. NNPC said the product was sold through its subsidiary, the Petroleum Products Marketing Company (PPMC).

According to the May 2020 version of the corporation’s Monthly Financial and Operations Report quoted by Kennie Obateru, the Group General Manager, Public Affairs Division, NNPC, 950.67 million litres of white products (only petrol) was sold by PPMC in the month.

This, he said “comprised 950.67 million litres of Premium Motor Spirit, popularly called petrol, only, with no Automotive Gas Oil or Dual Purpose Kerosene.”

“There was also no sale of special product in the month.”

Nigeria continues to depend on importation for its petrol supplies due to local dilapidated refineries that have failed to operate at optimal level despite billions of dollars budgeted for maintenance yearly.

Experts have said petrol importation is one of the main reasons the nation’s foreign reserves continues to struggle, especially at a period when oil prices are trading at a record low with broadly low demand for the commodity.

Nigeria’s foreign reserves is presently hovering around $36 billion, down from its record high of $45 billion attained in June 2019. The decline has also impacted the ability of the Central Bank of Nigeria to support the Nigerian Naira.

The Naira has been devalued by 15 per cent in the last four months and was recently adjusted from N361 a US dollar to N381 per US dollar on the Investors and Exporters forex window to ease the pressure on the reserves.

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Amaechi Urges National Assembly to be Careful Probing Chinese Loans

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Amaechi Says China is Becoming a Bit Apprehensive About Giving Money to Nigeria

The Minister of Transportation, Chibuike Amaechi, on Tuesday said he specifically urged the National Assembly to be careful about the ongoing probe of Chinese loan agreements.

The minister who appeared in a live television programme with the Minister of Justice/Attorney-General of the Federation, Abubakar Malami, said China is becoming a bit apprehensive about releasing additional loans to the country.

He said, “You know, I specifically urged the National Assembly to please be careful about this probe on the loan agreements. It is because we are trying to make an application for the Port Harcourt Maiduguri rail.

“If nothing else is happening, you know that our brothers are already saying that we don’t want to do any rail project in the South-East.

He added, “Now that we are planning to say that they should give us some loan for us to construct Port Harcourt to Maiduguri, and we are about to go to cabinet for approval, you are now shouting these terms are bad, Chinese people are wicked.

“How will they give you the money? I have documents to the effect that we are getting signals that they are becoming a bit apprehensive on whether we are doing this because we don’t want to pay them back.

Amaechi said the nation must learn to pay back procured loans, saying the $500 million loan obtained for the Abuja-Kaduna railway was presently being serviced.

He said, “Nobody has signed out anything. A sovereign nation is a sovereign nation; nobody can recolonise us. We must learn to pay our debts and we are paying, and once you are paying, nobody will come and take any of your assets.”

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