The Nigerian National Petroleum Company Limited (NNPCL) is spending N400 billion monthly on opaque petrol subsidy despite falling prices of crude oil in the international market.
The huge expenditure has also not halted the perennial fuel scarcity in Nigeria, especially in the Federal Capital Territory (FCT).
A recent report quoted the NNPCL to have stated that its monthly expenditure on refined petroleum products subsidy had grown up to N400 billion monthly.
The oil company’s Group Chief Executive Officer, Mele Kyari, said this at a recent ceremony held at the NNPC Towers, Abuja.
This development comes amid falling crude oil prices globally and consistent fuel scarcity recorded by the country between 2022 and 2023. While the NNPCL has not posted its full-year under-recovery (subsidy) expenditure for 2022, Dataphyte obtained the data for January to August, 2022.
The subsidy bill ensures that every litre of petroleum consumed in the country is bought at an official price. Official price of petrol was N165/litre, but it has been raised to between N190 and N195 per litre by marketers.
Falling crude oil prices
Between July 2022 when Nigeria recorded its highest subsidy figure of N448.782 billion and January 2023, the crude oil price (Brent) fell by 29.7 percent, from $121 per barrel to $85 per barrel, according to data provided by the Central Bank of Nigeria (CBN).
Could exchange rate be responsible for huge subsidy bill?
In January 2022, using the official dollar-to-naira exchange rate published by the CBN, a barrel of crude oil cost N36,725, but the subsidy bill for this period stood at N210.382 billion, according to the NNPCL report.
The NNPCL, in 2022, noted that Nigeria consumes 68 million litres of petroleum daily, with the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) stating that petrol consumption had dropped to 66.8 million litres daily as of September 2022.
At a more recent event, the NNPC group CEO said the daily petroleum consumption stands at 66.5 million litres.
Asides the drop in daily consumption, there has been a decrease in crude oil prices after the increases recorded in July 2022. The drop also factors in the dollar-to-naira exchange rate.
For instance, the price per barrel of crude oil dropped from N50,036 in July 2022 to N38,606 in January 2023, representing a 22.84 percent decrease.
Does Nigeria have accurate data on daily consumption?
It is unclear as to how the NNPCL recorded more subsidy payments when prices of crude oil were low. In other words, the NNPCL paid more subsidy when crude oil prices per barrel were lower in naira terms.
As of March 2022, the country was quoted as consuming 68 million litres of petroleum daily, and a barrel of crude oil stood as high as N50,409. The country paid N245.773 billion subsidy. When a barrel of crude oil fell to N41,913 in April of the same year, the country recorded N271.589 billion as a subsidy.
This development comes as the oil company is yet to come out with a disaggregated daily consumption rate for fuel in the country to further explain how disparities in subsidy figures are arrived at per time.
Increased subsidy bills amid fuel scarcity?
The subsidy bill and the quoted daily consumption have not stopped the perennial petrol scarcity in the country.
For instance, in 2022, a litre of petroleum sold for over N250 at filling stations in various parts of the country due to issues around the availability of petroleum products and logistics.
Scarcity of petroleum was also blamed for the rising inflation in the country. Inflation hit 21.82 percent in January 2023 from 21.34 percent in December 2022, according to the National Bureau of Statistics (NBS).
The queues returned in January 2023 and has persisted till March, with Nigerians lamenting their inability to access fuel.
Scrapping subsidy, way forward for accountability
The Lagos Chamber of Commerce and Industry (LCCI) has asked the Federal Government to scrap the opaque subsidy, noting that this would free resources for development.
An oil and gas policy expert, Henry Adigun, told Dataphyte that it was only ideal for the subsidy bill to fall, considering the drop in crude oil prices in naira terms within the period. These developments, he noted, should have had an impact on the subsidy bill.
He opined that scrapping subsidy was the only way forward to ensure that Nigerians bought fuel at the market price.