The Federal Government will, in the coming weeks, incur more subsidy on premium motor spirit (PMS), otherwise called petrol, as the price of crude oil price, yesterday, jumped to a record high of $97 per barrel.
Manufacturers and business owners may also witness an exponential rise in their cost of production as the prevailing situation may push the price of diesel and aviation fuel to near $1500 per liter.
Oil price has maintained continuous rise and witnessed an increase of about four per cent yesterday as Brent traded for about $97 barrels to keep the hope of analysts who believe that the commodity would soar past $100 per barrel on track.
Although Nigeria should be rejoicing over the windfall at the international market, the development remains a concern owing to the country’s inability to pump enough crude oil as well as total dependence on importation for petroleum products. The situation usually erodes every gain made from crude oil.
Federal Government may have returned subsidy payment on PMS after President Bola Tinubu initially announced that subsidy had been removed. Seeing the sustained rise in the product the government reverted to the scheme using the supposed commercialised Nigerian National Petroleum Company Limited to manage the market shocks and maintain monopoly of the downstream segment of the nation’s oil and gas industry.
Nigeria consumes approximately 19.5 billion liters of petroleum products yearly, with about 99 percent of that consumption being Premium Motor Spirit (PMS), while diesel and aviation fuel make up only about one percent.
Last month, the federal government paid N169.4 billion as subsidy to keep the pump price at N620 per litre.
A document by the Federal Account Allocation Committee (FAAC), sighted by our reporter yesterday, showed that in August 2023, the Nigerian Liquefied Natural Gas (NLNG) paid $275m as dividends to Nigeria via NNPC Limited. NNPC Limited used $220m (N169.4 billion at N770/$) out of the $275m to pay for the PMS subsidy. Then NNPC held back $55m, illegally.
While Russia had already closed its borders against export of diesel, a development that would keep significant volume from the market, oil traders are reportedly mopping up crude as Saudi Arabia and Russia announced an extension of their 1.3-million-bpd combined supply cut, and traders stopped obsessing over demand in China.
While JP Morgan is projecting that oil price would hit $150 per barrel over the past four weeks, traders had bought a total of 183 million barrels of crude and fuel futures.
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