Richard Ginika Izuora
Except Federal Government implements the Petroleum Industry Act, PIA, which provides for deregulation of the downstream oil and gas sector, it could spend up to 6.72 trillion naira ($16.2 billion) next year if it keeps a fuel subsidy regime in place.
In April, the National Assembly approved a 4 trillion naira petrol subsidy for this year after President Muhammadu Buhari asked for additional funds to offset higher global oil prices driven by the conflict in Ukraine.
Finance Minister Zainab Ahmed said on Thursday, that the federal government was working with two scenarios, one that assumed a “business-as-usual” approach where a subsidy would be in place throughout 2023 and would cost 6.72 trillion naira.
The second option “assumes that petrol subsidy will remain up to mid-2023…, in which case only 3.36 trillion (naira) will be provided for,” she said during a pre-2023 budget consultation in the federal capital Abuja.
Nigeria imports all of its refined products because local refineries have been mothballed for years although repair work have commenced on the refineries.
Higher crude prices are being offset by lower production due to oil theft and vandalism of pipelines in the oil-rich Niger Delta, said Ahmed.
She said oil output had averaged 1.32 million barrels per day during the first four months of this year. That means Nigeria has failed to meet its 1.8 million bpd OPEC quota.
Oil and gas revenue, which came in at 1.23 trillion naira between January and April, was way below a projected 3.12 trillion naira, Ahmed said.
“Revenue performance is expected to improve in the second half of 2022 as a result of concerted efforts to address the oil theft and pipelines vandalism,” the Minister said.