The projected oil price of the Federal Government of $62/barrel as contained in the 2022 Appropriation Bill has almost doubled going by the current global oil prices, which have been on the increase since the invasion of Ukraine by Russia on February 24, 2022.
Industry figures showed that Brent, the crude against which Nigeria’s oil is priced, leaped to a high of $118.11/barrel at 3 pm on Saturday, moving up by $7.65 or 6.23 percent when compared to its value the previous day.
Oil sector operators stated that the rise in crude prices might raise the amount currently spent on petrol subsidy by the Federal Government by about 100 percent when benchmarked against the projected price in the budget.
In December 2021, the House of Representatives passed the 2022 budget of N17.126tn and increased the oil benchmark to $62 against the $52 that was proposed by the executive.
The House had explained at the time that the increase in oil price was to reflect the current market value in the international market.
However, the current oil price of $118.11/barrel is almost double the $62/barrel benchmark that was set by the lawmakers.
The National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Chief Ukadike Chinedu, stated, “Of course, fuel subsidy could rise by 100 percent when the current price of crude is benchmarked against the projection in the 2022 budget.
“This is because oil prices have been climbing higher almost on a daily basis since Russia invaded Ukraine and caused some level of instability in the global oil business.”
Ukadike said the gains that Nigeria would have made from the rising crude oil prices were being eroded by the increasing amount being spent on petrol subsidies.
This, he noted, was why oil marketers had been urging the government to fix Nigeria’s refineries in order to effectively halt petrol subsidy and channel subsidy spending to other sectors such as education, health, etc.
Last month, the President, Major General Muhammadu Buhari (retd.), wrote to the Senate, seeking the approval of a supplementary budget of N2.56tn.
Buhari had explained in his letter that the money was meant for subsidy on petroleum products from June to December 2022, as he requested the National Assembly to appropriate an additional N2.56tn in the 2022 budget that was passed in December 2021.
The President had in August 2021 given his assent to the Petroleum Industry Act, a law that was meant to put an end to petrol subsidy in February this year.
But the Federal Government had to suspend plans to remove subsidies on petrol after labor unions threatened to ground the country if it was removed.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, had stated that N443bn was the amount available to fund the subsidy in 2022.
Ahmed, however, stated that the Nigerian National Petroleum Company Limited requested a total of N3tn from the Federal Government to fund fuel subsidy this year.
The NNPC is the sole importer of petrol into Nigeria for more than four years and has been shouldering petrol subsidy costs on behalf of the Federal Government.
The government’s supplementary budget of N2.56tn for subsidy and the N443bn in the 2022 budget as approved in December, indicated that Nigeria would spend about N3tn on subsidy this year.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, recently decried the huge subsidy spending, as he explained that Nigeria was a net importer of refined petroleum products and that this was counter-productive in terms of the rising prices of crude.
He said, “In Nigeria right now, we are a net importer of petroleum products and when the prices of crude oil go up, they also affect the prices of petroleum products.
“So for us who are the net importers, it is also not very good for us. What we are saying is that if you are going to produce more and you get more dollars from your production, then it gives you more money for your imports.
“But if you are now producing less and then you still have to make sure that the Nigerian market is supplied fully with petroleum products, then you will see that there will be a shortfall.
“That is why we would like to have our production now to be at the point where we will be getting enough, but at this point our production is not very optimal. So, at the end of the day, we are not necessarily making a lot of gain.”
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