There are indications that the Federal Government through the Nigerian National Petroleum Corporation, NNPC would be under more pressure to fund Nigeria’s petrol under-recovery or subsidy as the price of Bonny Light rises to $65 per barrel in May 2021.
This showed an increase of 150 per cent when juxtaposed against $26 per barrel recorded in the corresponding period of 2020 when the outbreak of the coronavirus pandemic and low demand for crude oil had culminated in low prices. However, the current high prices of crudes, and by extension, petrol, is attributed to the re-opening of many economies, the discovery of Coronavirus pandemic vaccines and the efforts of the Organisation of Petroleum Exporting Countries, OPEC to achieve market stability.
The 16th OPEC and non-OPEC Ministerial Meeting of the Declaration of Cooperation, DoC, which took place via teleconference on Tuesday, April 27, 2021, under the chairmanship of HRH, Prince Abdul Aziz bin Salman, Saudi Arabia’s Minister of Energy, and Co-Chair, HE, Alexander Novak, Deputy Prime Minister of the Russian Federation, had raised hope for increased stability. At the end of the meeting, OPEC had stated: “The meeting emphasized the ongoing positive contributions of the Declaration of Cooperation in supporting a rebalancing of the global oil market in line with the historic decisions taken at the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting, ONOMM on April 12, 2020 to adjust downwards overall crude oil production and subsequent decisions.
The meeting highlighted the continuing recovery in the global economy, supported by unprecedented levels of monetary and fiscal support, while noting that the recovery is expected to pick up speed in the second half of the year. The Ministerial Meeting emphasized, however, that Covid-19 cases are rising in a number of countries, despite the ongoing vaccination campaigns, and that the resurgence could hamper the economic and oil demand recovery.
Commenting on the development, weekend, a Port Harcourt-based analyst, Dr. Bala Zaka said: “With the rise in oil price, it would now cost more to procure and refine crude oil, meaning that the cost would be transferred to Nigeria as the nation currently imports all its petrol from the global market.”
In its recent statement obtained by Vanguard, NNPC confirmed that it was under pressure to fund the subsidy when it stated: “The revenue projection contained in the letter to the Accountant-General of the Federation being cited in the media pertains only to the federation revenue stream being managed by the corporation and not a reflection of the overall financial performance of the corporation.”
The downstream sector of Nigeria’s petroleum industry was deregulated in March 2020, when the prices of crude were relatively low at less than $35 per barrel, meaning that the cost of refining and price of petrol were relatively cheaper then. In its April 2020 report obtained by Vanguard, OPEC confirmed that: “Crude oil prices collapsed in March 2020, recording their deepest monthly drop since the global financial crisis in 2008. The ramifications of the Covid-19 pandemic were the main driving force, resulting in unprecedented worldwide oil demand shock and massive sell-offs in the global oil markets, amid a significant crude surplus.”