The international oil benchmark, Brent Crude, was just about 30 cents away from hitting $70 amid market optimism on the United States and Europe reopening. According to data from Oilprice.com, Brent Crude gained $0.83 and traded at $69.71 as at 2:44 pm on Wednesday, 5th May 2021.
Several players in the Nigerian oil and gas industry are raising concerns over the recent surge in crude oil prices. For the Nigerian economy, a rise in oil prices in the international market would increase the cost of importing petroleum products.
According to the National Oil Company, the Nigerian National Petroleum Corporation (NNPC), the country pays an estimate of N100 billion for petroleum subsidies monthly. The Corporation had announced earlier that it would be withholding N112bn from April Federal Account Allocation Committee payments to cover subsidy on petroleum imports.
The NNPC had already stated in the past that the payment of subsidies do not affect its finances, but a continued increase in oil prices on the international market may pose a threat to the Corporation fulfilling its obligation.
Commenting, the National Operations Coordinator of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Michael Osatuyi, said that removing the current subsidies may drive the price close to N300, and distort the whole system as petrol is used around virtually all industries in the country.
He said: “The government is trying to manage the problem. In a deregulated system, the pump price has to go up considering the surge in crude oil prices.”
“The NNPC has revealed that it will spend over N100bn on subsidy in April, that is about N2tn a year, a huge amount.”
“Nigeria has about 200 trillion cubic feet of gas that can serve us for about 50 years at 60% of the cost of petrol over the same period.”
“The government has met us, IPMAN, and asked to use our fuel stations for the distribution of Compressed Natural Gas and Liquefied Natural Gas.”
“Once the government successfully moves to the CNG and LNG standard, the negative effects of the rise in fuel subsidy payments can be mitigated.”
A leaked draft document quoted by S&P Global Platts shows that the European Union has increased its 2030 target for the share of renewables in primary energy from 32% to 38 to 40%. European countries remain the combined largest importers of Nigerian crude and this could hurt the country’s finances as crude oil remains Nigeria’s largest source of foreign exchange.