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FG abolishes fuel subsidy regime as full deregulation sets in

Nigeria has finally bowed to long-standing pressure to restructure the downstream segment of the Nigerian oil industry through the removal of fuel subsidy. 

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Nigeria plans to support oil price with lower production cost per barrel, NNPC records 34% increase in trading surplus, NNPC begs security agencies to allow petrol tankers commute during lockdown, FG abolishes petrol subsidy regime as full deregulation sets in

The Federal Government of Nigeria has finally bowed to long-standing pressure to restructure the downstream segment of the Nigerian oil industry through the removal of fuel subsidy.

This comes as the global oil industry continues to grapple with the low demand and subsequent price slump that have been caused by the Coronavirus pandemic.

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According to the GMD of the Nigerian National Petroleum Corporation (NNPC), Malam Mele Kyari, Nigeria would no longer be paying for under-recovery or subsidy on petrol, especially due to the current development in the global oil sector.

READ MORE: COVID-19: Nigeria needs $50 billion to survive an impending recession

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Kyari disclosed this yesterday in Abuja, during an interview session on a monitored television programme. He said:

There is no subsidy and it is zero forever, going forward there will be no resort to either subsidy or under-recovery of any nature.

“NNPC will play in the marketplace, it will just be another marketer in the space. But we will be there for the country to sustain the security of supply at market price.”

Kyari believes that the liberalization of the sector and the removal of subsidy will eliminate the incentive to smuggle petrol across the various borders. This is because the arbitrage which the smugglers used to enjoy will no longer exist.

The NNPC boss went further to disclose that the removal  of fuel  subsidy would help the Federal Government and the Corporation to monitor and determine Nigeria’s actual consumption pattern of the product.

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[READ MORE: FG ready for OPEC talks, as brent crude risk plunging to single digit low)

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On transparency, Kyari said that the state-owned oil firm is probably the only company in the world that publishes its monthly financial and operational reports. He said the corporation is proud of the initiative, and then  assured Nigerians of NNPC’s commitment to transparency and accountability in all its transactions.

He then disclosed that Nigeria is currently producing 2.3 million barrels of crude oil per day, including condensates. This is in tandem with the country’s plan to increase its production output to 3 million barrels per day in the nearest future.

While commenting further, Kyari stated that Nigeria’s export terminals are still operational. This is despite the COVID-19 pandemic which had affected demand and supply fundamentals.

The NNPC boss also assured Nigerians of adequate supply and distribution of petroleum products. He explained that in spite of the Coronavirus pandemic, the corporation had in stock about 2.6 billion litres of petroleum products that could serve the country’s energy needs for the next two months.

You may watch the full interview session by following the link below.

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- chike.olisah@nairametrics.com.

1 Comment

1 Comment

  1. Nwaizu Ikechukwu

    April 8, 2020 at 12:03 am

    in a land of perversive corruption you allow derelugation for the major economic ike ebenchuaja. I believe it is sucidal.

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Economy & Politics

Output cut: Nigeria leads in OPEC non-compliance with 50 unsold cargoes of crude

Nigeria and Iraq were reported not to have kept to their commitment to the huge production cut deal that had promised to reduce output by 9.7 million barrels of crude oil per day.

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Petroleum Industry Bill to be passed by mid-2020, says Sylva, FG discovers crude oil in north, says there’s more , OPEC, non-OPEC countries to meet as Saudi, Russia price war affects Nigeria’s budget, FG considers fuel price reduction, OPEC deal: Nigeria to generate additional $2.8 billion revenue as FG reacts

As opinions continue to differ on whether OPEC will extend its current oil output cut beyond June, available information has shown that not all members of the oil cartel complied fully with their agreed quotas for the month of May. This is despite the fact that the oil output by OPEC member countries reached its lowest in almost 20 years.

Available data from oilprice.com showed that OPEC members cut their output by 5.91 million barrels per day from the April level, producing 24.77 million barrels per day. This figure also showed a 4.48 million barrel per day of the agreed output cut, thereby representing a 74% compliance level.

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Nigeria and Iraq were reported not to have kept to their commitment to the huge production cut deal that had promised to reduce output by 9.7 million barrels of crude oil per day.

Iraq was able to achieve just 38% compliance of its agreed output cut for the month of May, while Nigeria, which achieved a much lower compliance of the agreed output cut, recorded 19% compliance of what was agreed. Saudi Arabia showed the highest compliance, recording 96% of the agreed output cut.

Some have attributed the noncompliance of some members of OPEC to the agreed output cut, to the contractual obligations and commitment to buyers, given the short timeframe between when the agreement for the output cut was made and its implementation.

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Meanwhile oil exports from Angola and Congo remained steady at high prices on Friday, while Nigerian oil fared lower amid huge inventory of unsold cargoes.

Nigeria continues to face some difficulty in the oil market, primarily due to sluggish demand from Europe; it has around 50 unsold cargoes of crude oil yet to be sold for the months of June and July.

Meanwhile, India has become one of the few buyers for the Nigerian oil. Indian oil firms bought about 5-6 million barrels of Nigerian crude oil last week and has bought about 2 million barrels as at Thursday this week.

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Business News

President Muhammadu Buhari reshuffles NNPC’s board of directors

Note that the former board included the late Chief of Staff to the President, Abba Kyari as a member. Stakeholders have since expected the President to reconstitute a new board to take over.

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President Muhammadu Buhari to address Nigerians on Monday, receives update and recommendations from PTF

President Muhammadu Buhari has approved the reconstitution of the board of the Nigerian National Petroleum Corporation (NNPC) after the expiration of the tenure of the current board.

The newly constituted board members are expected to serve for a tenure of three years, effective immediately. They will take over from the last board, whose 3-year tenure officially ended in 2019. Information about this development is contained in a State House press release that was published on the official twitter handle of the Nigerian Presidency on Saturday morning.

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READ MORE: Construction of ICT Parks nudges Nigeria into digital transformation

READ ALSO: CBN and NIPOST open pilot microfinance branches

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The newly constituted NNPC board is made up of six members from each of the geo-political zones in the country. The members include the following individuals:

  • Mallam Mohammed Lawal, representing the North West
  • Dr Tajudeen Umar from North East
  • Adamu Mahmood  Attah from North Central
  • Senator Magnus Abe from the South-South
  • Dr Stephen Dike from the South East, and
  • Chief Pius Akinyelure from the South West geo-political

READ MORE: Boko Haram: A protracted battle yet to be won?  

Of the six members, three are returning members on the board – Chief Pius Akinyelure, Mallam Mohammed Lawal, and Dr Tajudeen Umar from North East.

Note that the constitution of the new board is considered a welcome development, as it balances the representation of the six geo-political zones on the board. The previous constitution of the board was faulted for not being “balanced”.

READ ALSO: Full text of President Muhammadu Buhari’s 58th Independence day broadcast

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Note that the former board included the late Chief of Staff to the President, Abba Kyari as a member. Stakeholders have since expected the President to reconstitute a new board to take over.

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Around the World

Zoom’s market valuation hits $50 billion mark, thanks to COVID-19

Zoom’s share price now trades at an eye-watering 55 times estimated revenue compared with an average of 7 times for information technology stocks in the S&P 500, according to information obtained from Bloomberg.

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Zoom

Zoom Video Communications’ shares surged to record highs on Friday, as bullish runs in the last hours of trading helped the company to close with a market capitalization of more than $50 billion. The stock gained about 9.7% to jump to $179.48, thereby giving it a market value of $50.6 billion. 

Note that this is the first time Zoom’s valuation is reaching this high level since it became a quoted company. The tech giant, which owns popular video conferencing software “Zoom”,  has gained more than 160% this year. This is because investors are betting that the surge in Zoom users amid the COVID-19 pandemic, would eventually translate to long-lasting revenue growth.

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READ ALSO: How VCs are encouraging terrible business practices by founders

Zoom’s share price now trades at an eye-watering 55 times estimated revenue compared with an average of 7 times for information technology stocks in the S&P 500, according to information obtained from Bloomberg.

Following the significant jump in the company’s valuation, the net worth of its founder and Chief Executive Officer, Eric Yuan, also rose significantly by more than $800 million on Friday. He now has a net worth of $9.3 billion, according to the Bloomberg Billionaires Index. 

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Meanwhile, in reaction to Zoom’s overnight success, Gennie Gebhart, a researcher with the Electronic Frontier Foundation, said she hoped Zoom would change course and offer protected video more widely. It should be recalled that some users of the app had raised security concerns back in April, as Nairametrics reported

READ ALSO: Did Satoshi Nakamoto cause the panic sell-off in Bitcoin market

Meanwhile, Zoom has recruited Alex Stamos, a former chief security officer at Facebook, and other top security experts to help deal with the security issues which led to some top companies banning its use. While discussing efforts being made to deal with the security challenges, Stamos told Reuters:

 “At the same time that Zoom is trying to improve security, they are also significantly upgrading their trust and safety. The CEO is looking at different arguments. The current plan is paid customers plus enterprise accounts where the company knows who they are.” 

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