With Global Energy Headwinds, Massive Importation, FG’s Subsidy on Petrol Jumped 213.5% in 2022

Emmanuel Addeh in Abuja

As the Russia-Ukraine war took its toll on the world oil market and Nigeria’s total petrol imports increased massively in 2022, the country’s subsidy bill grew by as much as 213.5 per cent compared with 2021, a THISDAY review of available information has shown.

THISDAY checks showed that while Nigeria expended N1.43 trillion on  under-recovery in 2021, the bill jumped to N4.39 trillion (about $9.7 billion) in 2022. The N4.39 trillion was quoted in a Reuters report obtained from the Nigerian National Petroleum Company Limited (NNPC).

Numbers analysed by THISDAY further revealed that the expenditure on fuel subsidy in 2021 exceeded that of last year by about N2.96 trillion, with the difference more than doubling the subsidy last year.

Also worsening the rising cost of subsidy was the weakening value of the naira compared to the American dollar, the currency mostly used in global oil transactions.

Previous governments in Nigeria have tried and failed to remove or cut the subsidy, a politically sensitive issue in the country of 200 million people. Nigeria imports nearly all its refined fuels because local refineries were shut due to years of neglect.

This year alone, Nigeria is expected to keep its costly subsidy until mid-2023 and set aside 3.36 trillion naira ($7.5 billion) to spend on it.

Between January and October of 2022, the Central Bank of Nigeria (CBN) revealed that Nigeria spent a total of $12.44 billion on the importation of petroleum products, according to the apex bank’s October 2022 Economic Report stated.

When the NNPC was still making public its monthly subsidy data until it stopped around mid-year 2022, information from the company indicated that the government subsidised the commodity with N1.593 trillion between January and June 2022, before finally hitting N4.39 trillion by the end of the year.

The amount spent as subsidy on petrol in January, February and March were N210.38 billion, N219.78 billion and N245.77 billion, respectively. A total of N271.59 billion, N327.1 billion and N319.18 billion were spent as subsidy in April, May and June respectively during the year.

Meanwhile, the Organisation of Petroleum Exporting Countries (OPEC) has confirmed Nigeria’s December production of  1.235 million barrels per day (bpd) in December, with the country retaining its position as the largest oil producer in Africa during the month.

Going by direct communication, this means that Nigeria’s oil output increased by 50,000 bpd, OPEC said.

The NNPC had recently said that improved security surveillance along major crude oil pipelines was helping to raise oil production from about 900,000 barrels per day to 1.59 million barrels per day.

In the month under review, the oil production of Angola which had earlier overtaken Nigeria, stood at 1.088 million bpd, while Algeria pumped 1.01 million bpd, based on direct communication with the respective countries.

Furthermore, the country’s oil rigs count grew from 10 to 12 during the period. This was a marginal rise given that Nigeria’s oil rigs count fell from 16 to eight between 2019 and 2022, underscoring the magnitude of challenges the country has faced in producing OPEC monthly allocation.

The latest OPEC Monthly Oil Market Report (MOMR) showed that while the average rigs count was 16 in 2019, it fell to 11 in 2020, and then further to seven in 2021, but climbed to 12 in December 2022.

In the first quarter of 2022, the count was eight, it was 11 in the second quarter of the year, and again fell to nine in the third quarter last year, according to the OPEC data.

In the oil and gas industry, the rigs count is a major index for measuring activities in the upstream sector. While for instance, 26 rigs were in operation, on both onshore and offshore terrains, in 1997, this number has reduced markedly in the last few years.

Related Articles