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Nigeria’s oil subsidy could hit $16.2 billion in 2023 but government isn’t ready to bell the cat yet

Published

2 years ago

July 22, 2022

The sorry tale of Nigeria’s oil subsidy regime could become messier as the Finance Minister, Zainab Ahmed has revealed the West African could spend up to 6.72 trillion naira ($16.2 billion) next year on subsidy.

The minister said fuel subsidy could rise to nearly 70% jump from this year’s budget if it keeps it place.

Despite her increasing debt profile, Nigeria’s government in January postponed its planned removal of subsidy on petroleum products till further notice. Petrol subsidy payments reportedly gulped overN1.15 trillion 2021 alone, resulting in low revenue for federal, state and local governments to cater for developmental projects.

The minister made the revelation during a pre-2023 budget consultation in the federal capital Abuja. The second option “assumes that petrol subsidy will remain up to mid-2023…, in which case only 3.36 trillion (naira) will be provided for.”

“Revenue performance is expected to improve in the second half of 2022 as a result of concerted efforts to address the oil theft and pipelines vandalism,” the finance minister said.

Ahmed said the federal government was working with two scenarios, one that assumed a “business-as-usual” approach where a subsidy would be in place throughout 2023 and would cost 6.72 trillion naira.

Although Nigeria is one of the largest oil producers in the world, the West African country does not refine crude oil locally. State-owned Nigerian National Petroleum Corporation (NNPC) has four refineries, two in Port Harcourt (PHRC), and one each in Kaduna (KRPC) and Warri (WRPC) but none has worked to capacity for years despite several investments to succinate the refineries.

Nigeria exports its oil for refining, and pays heavily to import the refined products and sell the Premium Motor Spirit at subsidized rate to final consumers. There has always been discrepancy on the actual figure of consumed petroleum product in Nigeria. The subsidy regime has eaten the country deeper than it can afford.

With the 2023 elections in sight, the Nigeria government appears not ready to bell the cat on the subsidy regime.

Related Topics:Featured Fuel subsidy Nigeria

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Nigeria’s inflation hits 28-year high of 33.20%

Published

15 hours ago

April 15, 2024

Ifeoluwa Dada

The recent gains of Nigeria’s Naira as the best-performing currency worldwide in the last month have had little or no impact on the consumer price index in the West African country as its inflation rate reached a 28-year high of 33.20%.

According to the latest data from the National Bureau of Statistics, Nigeria’s inflation has continued its 15-month-a-row surge driven by soaring food and energy costs despite the central bank’s rate hikes aimed at halting its ascent.

This was 10.37% more than the 21.9% inflation rate seen in March 2023. Year-over-year, rural inflation was 31.45% in March 2024. Rural inflation fell from 2.9% in February 2024 to 2.87 % in March 2024, which was a 0.20 percentage point drop from February 2024.

It went up by 5.71% points from March 2023 to March 2024, when it was 19.79%. The average rural inflation rate for the twelve months finishing in March 2024 was 25.50%.

Food prices went up by 40.1% a year in March 2024, which was 15.56 percentage points more than the rate of 24.45% a year earlier. The statistics office said food and non-alcoholic beverages were the biggest contributors to the pickup in inflation. Food inflation rose to 40.01% year-on-year, from 37.92% a month earlier.

Since President Bola Tinubu ended an expensive gasoline subsidy and devalued the naira twice in his first year in office, price pressures have grown. To get the economy off of subsidies that have hurt the government’s finances, the government recently raised energy rates for people who use the most electricity.

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Diesel gulping over 80% of Nigerian manufacturers’ profit, association claims

Published

22 hours ago

April 15, 2024

Ifeoluwa Dada

Following recent energy failure which has seen Nigeria suffer its worst blackout in decades, manufacturers in the country have lamented the high cost of diesel which is largely used as an alternate energy source for operations.

The Director General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, while addressing newsmen on Sunday on the
the plight of manufacturers against the backdrop of rising prices of their products stressed that automotive gas oil (AGO) gulped over 80℅ of manufacturers’ profit.

Ajayi-Kadir stated: “We have at different fora informed government and relevant agencies of what to do to bring down these inimical worsening high operating costs in the country. Nigerians should not blame local manufacturers for increasing the cost of goods, because they are being confronted with debilitating conditions.

“Do you know that diesel is taking 80 per cent profit of surviving manufacturing firms in Nigeria currently at the rate of about N1,700?

“Which manufacturer can cope with that astronomical price for energy to produce and you won’t expect him to increase his products in the country?

“Also, look at the new Customs exchange rate, new interest rate, scarcity of foreign exchange (FX), NAFDAC ban and others. How do you want to cope in production and make a profit?”

Although there was relief two weeks ago as privately run Dangote Refinery began diesel production which crashed the price of diesel by 29.4% production cost however remain daunting for manufacturers.