The International Monetary Fund, (IMF) and the Nigerian National Petroleum Company, are locking horns on claims and counterclaims on secret return of petrol subsidy in the country.
The IMF is still saying that Nigeria’s reintroduction of a gasoline subsidy months after it was scrapped is expected to guzzle almost half of its projected oil revenue this year.
The implicit subsidy will cost the country an estimated N8.43 trillion ($5.9 billion) of its projected N17.7 trillion oil revenue, in 2024, the IMF said in a report published on Thursday.
Its forecasts are similar to Bank of America’s, which projects it could cost Nigeria between $7 billion and $10 billion this year if it imports between 18 and 25 billion litres of gasoline, Tatonga Rusike, BofA sub-Saharan Africa economist, wrote in a note.
It said that rising crude oil prices are set to send Nigeria’s ‘secret’ bill for fuel subsidies rocketing, threatening to exacerbate the already precarious economic situation of Africa’s largest oil producer.
Brent, the benchmark for Nigeria’s crude oil, has gone from an average of $77 in January to as much as $86 per barrel as of Tuesday.
Although the rising price of crude oil could help in boosting funding for the country’s 2024 budget, which has a benchmark of $77.96 per barrel, the country has been unable to meet its production quotas as its declining production means it cannot increase crude oil revenue from oil sales.
Higher oil price also translates to a larger petrol subsidy burden on the Nigerian National Petroleum Company (NNPC) Ltd.
This is because the federal government has forced a lid on the retail price of petrol, even as the landing cost has long crossed the pump price, leading to the conclusion that the government has begun subsidising the commodity.
