While the recent appreciation in crude oil price has provided Nigeria an opportunity to earn more revenue from oil sales, the country equally spends a considerable amount of that on importing petroleum as well as on subsidy payment, writes Chineme Okafor
The Nigerian National Petroleum Corporation (NNPC) has leveraged the continuing healthy rise in crude oil prices to earn profits on its operations.
According to the operational report of the corporation, between February and May of 2018, it earned a cumulative profit of N63.73 billion from its operations in the industry.
The report indicated the corporation started closing its monthly trade with surpluses in February, and continued into May – the last month of the report.
Furthermore, the report showed that within the four months NNPC earned a total of N63.73 billion as profit in the review period.
A breakdown of this showed that it got N16.72 billion in February; N11.73 billion in March; N17.16 billion in April and N18.12 billion in May.
But even at that, the reports showed the corporation still recorded consistent trading deficits in five of its subsidiaries which included its Ventures Strategic Business Unit; the Port Harcourt Refineries; Warri Refineries; Kaduna Refineries; and its corporate headquarters, all of which have been its loss-making centres.
Therefore, some analysts believe Nigeria like other oil producing countries is benefiting from the present rising oil prices which are linked to escalation of tension in the Middle East, growing concerns about Venezuela oil production, strong conformity with production agreement by member countries of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC producers, as well as bullish drawdown of US crude oil Inventory.
For instance, the May report stated that average crude oil price for the month stood at $73 per barrel as against $71.76/b in April 2018. Within this period, NNPC said Nigeria’s crude oil production totalled 58.96 million barrels of crude oil and condensate, with an average daily production of 1.97 million barrels per day (mbd).
Similarly, in the May report, the NNPC stated that total export receipt of $343.08 million was recorded as receipt against $447.58 million received in April 2018.
It added that the contribution from crude oil amounted to $244.71 million while gas and miscellaneous receipt stood at $75.65 million and $22.72 million respectively
Of the export receipts, the NNPC said $105.17 million was remitted to the Federation Account while $237.91 million was remitted to fund the Joint Venture (JV) cost recovery for the month of May, 2018 to guarantee current and future production.
Cumulatively, the corporation said: “Total export crude oil and gas receipt for the period May 2017 to May 2018 stood at $4.91 billion. Out of which the sum of $3.52 billion was transferred to JV Cash Call as first line charge and the balance of $1.40 billion was paid into Federation Account.”
More oil revenue
Furthermore, in June, NNPC said the country’s oil earnings increased by 35 per cent, thus indicating it continued to benefit from the steady growth in oil prices at the international market.
In a statement which announced the release of its June 2018 monthly financial and operations report, the corporation stated that the total financial value of the crude oil and gas export sales the country made in the month was $416.07 million in June.
It explained that the figures were 35.78 per cent higher than that of the previous month which was $343.08 million. This also signified that the country bounced back from a drop in oil revenue in May having earned $447.58 million from oil and gas export in April before sliding to $343.08 million in May.
Again, industry statistics showed that oil price for Brent crude oil in June was $74.41 per barrel; $76.98 per barrel in May of 2018 – the period Nigeria earned less between these three months; and $72.11 per barrel in April.
Notwithstanding, details of the sales figures from the NNPC indicated that crude oil export sales contributed $274.95 million which it said translated to 66.08 per cent of the dollar transactions compared with $244.72million contribution in the previous month. The export gas sales for the month, it explained amounted to $141.12 million.
Subsidy on petrol
Irrespective of the gains the country may be making from the rising oil price, it appears to equally disbursing significantly on subsiding the volumes of petrol consumed by its economy.
Recent petrol supplies figures sighted by THISDAY indicated that the amount of financial subsidy Nigeria currently absorbs to keep the pump price of petrol at N145 per litre instead of the expected open market price may have gone up to N65.6 kobo.
The development follows the rising price of crude oil in the international market and its impacts on the landing cost of petrol into the country.
As gathered from operators in Nigeria’s downstream petroleum sector, the landing cost of a litre of petrol had similarly gone up to N196.3 kobo per litre.
Based on this, THISDAY summed up the N14.3 distribution margin approved in the last pricing template for petrol by the Petroleum Products Pricing Regulatory Agency (PPPRA) – an agency of the federal government responsible for periodically calculating and approving products’ pricing for the market – with the N196.3 kobo landing cost, and arrived at N210.6 kobo, which should be the current open market price of a litre of petrol in the country.
In addition, it then calculated the difference between N210.6 kobo (actual market price per litre) and N145 (government price per litre) and arrived at N65.6 kobo, which is the subsidy or under-recovery recorded over every litre of petrol supplied by the Nigerian National Petroleum Corporation (NNPC) which has since October 2017 reportedly become the sole importer of petrol in Nigeria.
Furthermore, THISDAY multiplied the N65.6 kobo by 46.54 million litres the ministry of petroleum resources disclosed in a recent newsletter was the daily petrol consumption level of the country in August and arrived at N3, 053,024,000 which was the figure the country may have incurred daily as subsidy on petrol consumption.
Additionally, for a period of 31 days in August, the calculations indicated that N94, 643,744,000 could have been absorbed as subsidy by the NNPC to keep the pump price at N145 per litre.
Though the NNPC did not confirm the figures, its Group General Manager, Public Affairs, Mr. Ndu Ughamadu, however explained to THISDAY that it had the financial capacity to absorb any gap between the landing costs and pump price of petrol in the country.
Ughamadu, equally stated that the NNPC would continue to shoulder such burden to keep petrol supplies stable for all Nigerians.
“As it stands, the NNPC is currently playing the role of a ‘social supplier’ with reference to PMS. The NNPC has the financial capacity to absorb any gap between the landing cost and prevailing pump price of PMS,” said Ughamadu.
He added: “The corporation, therefore, will continue to shoulder associated losses in order to ensure adequate and robust supply of petroleum products to consumers and all Nigerians.”
In December 2017 when oil price was $64.37 per barrel, the NNPC’s Group Managing Director, Dr. Maikanti Baru, disclosed that the landing cost of petrol was N171.40, and that a metric tonne cost $620.
Similarly, Baru, explained that NNPC’s crude for product swap programme – the Direct Sales Direct Purchases (DSDP) – was under pressure and unable to satisfy increased petrol consumption in the country because it was originally programmed to meet the country’s 35 million litres daily consumption level.
He particularly stated then that: “The landing cost goes with the CIF (Cost, Insurance and Freight) price of PMS. As of Friday, the CIF price was in the neighbourhood of $620 per metric tonne, with the official exchange rate of N305 to the dollar, the landing cost should be N171.40 per litre.
“The government has consistently indicated that the N145 per litre is the price and to do that, it has mandated the NNPC to keep the equivalent depot price of N133.28 per litre which will keep a cap of N145 per liter, there is a lot of profit in between after taking the transportation cost of N7 off, so there is sufficient margin for the marketers in that PPPRA template at the price cap.”
Reacting to the rising petrol subsidy sum, Budgit which is a civic technology organisation, stated in its twitter handle that subsidy cost under recovery between January and May 2018 were N45.78 billion; N59.5 billion; N34 billion; N77.9 billion and N88.9 billion.
Budgit, further explained that unlike in previous administrations where fuel subsidy was budgeted and appropriated, the situation was different now with the NNPC currently importing and paying itself subsidy before it remits the balance to the Federation Account.
It equally said in its opinion on the development, that the practice was not transparent and unconstitutional.