Nigeria appears to be at crossroads over the steady rise in oil prices which hit $72 per barrel over the weekend, distorting earlier projections of the World Bank and the Organisation of Petroleum Exporting Countries (OPEC), which had earlier predicted a low price regime for 2021.
Brent crude, the global oil price benchmark is gradually making a rebound with a barrel of oil likely to hit $75 in the weeks ahead and probably above, a development that signaled a ray of hope for the troubled sector which has battled a low price regime occasioned by the coronavirus pandemic since last year.
Ironically, while other oil producing countries with robust refining capacity are anxious to reap the gains of higher oil prices, Nigeria seems to be fretting because a higher price regime will definitely translate to increased cost of refining and higher fuel subsidy.
On the other hand, gains will be reaped for the country as its 2021 oil price projection was based on an estimate of $40 per barrel, indicating a daily gain of $57.6 daily for the country at 1.8 million barrels of oil production per day.
But the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Mele Kyari, had warned that states might have nothing to share from the FAAC because the country spends about N112 billion monthly subsidizing fuel as a result of the inefficient state of the nation’s refineries which currently is in comatose.
There was anxiety and panic in the country in April when the Nigerian National Petroleum Corporation (NNPC) had, in a letter to the Accountant General of the Federation , projected that it would deduct N112 billion oil and gas proceeds from the Federation Account for fuel subsidy in order to ensure continuous supply of petroleum products in the country and guarantee energy security
With daily consumption of petrol at 55 million litres per day and oil at $72 per barrel, the N112 billion monthly subsidy claims may balloon to over N200 billion monthly.
Speaking in April at the fifth edition of the special ministerial briefings coordinated by the presidential communications team, Kyari said while the actual cost of importation and handling charges of petrol amounted to N234 per litre, the government was selling the product at N162 per litre. That development, according to him, cost the country about N120billion monthly.
While pump price steadily rose, the face-off between labour and Federal Government kept the latter in a tight corner. The unions had earlier forced the government to reverse the pump price from N168 per litre last year to N162.