The Federal Government is planning to tap €2bn ($2.2bn) by this month or next of the money it raised in a Eurobond sale last year and targets more local borrowing in 2022 to help fund subsidy on Premium Motor Spirit, popularly called petrol, the Minister of Finance, Budget and National Planning, Ahmed Zainab, has said.
It was also gathered that Nigeria’s crude oil production dropped from the 1.399 million barrels per day figure recorded in January this year to 1.258 million barrels per day in February.
This indicated a daily crude oil production loss of 141,000 barrels in the month of February 2022, according to the latest monthly oil market report for March 2022 released by the Organisation of Petroleum Exporting Countries.
Speaking in Cairo, Egypt, on the side-lines of an Arab-African conference, Ahmed told Reuters that the €2bn which the Federal Government plans to tap was needed to fund subsidy following the rise in global crude oil prices.
The recent spike crude oil prices triggered by the war in Ukraine had caused an increase in the cost of refined petroleum products.
The refined products are largely imported into Nigeria due to the dormancy of the country’s refineries under the management of the Nigerian National Petroleum Company Limited.
Ahmed, however, stated that the country would not tap the Eurobond market this year.
“Rising oil prices has put us in a very precarious position … because we import refined products … and it means that our subsidy cost is really increasing,” Reuters quoted the minister.
The Federal Government in January reversed a pledge to end petrol subsidy and instead extended the subsidy regime by 18 months to avert what would have been a nationwide protest by labour unions.
However, oil prices have increased lately, while Nigeria depends almost entirely on imports to meet its domestic petroleum products’ needs.
This is despite the fact that Nigeria is a crude oil exporter. The country is also facing shortages in PMS supply currently after taking delivery of some unusable substandard products.
The President in a letter to the National Assembly in February requesting extra funds to pay for petrol subsidy said the country’s budget deficit would rise to four per cent of Gross Domestic Product as the government eyes new domestic borrowing. The deficit was originally set at 3.42 per cent of GDP.
Reuters reported that petrol subsidy cost Nigeria up to $7bn a year in revenue, adding that Ahmed said the government was working with lawmakers to boost revenues and that the rise in oil prices meant that borrowings would increase more than planned.