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Petrol Subsidy-Will there be an end to the discourse?

Local media reports citing a recent report by NNPC say the federal government paid N752bn as a petrol subsidy in 2019.

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petrol subsidy, PPPRA, Pump price

Local media reports citing a recent report by the Nigerian National Petroleum Corporation (NNPC) say that the Federal Government paid N752bn as petrol subsidy in 2019. The report also indicated that 21.8bn litres of petrol were imported into the country through its Direct Sales Direct Purchase (DSDP) swap programme between January 2019 and January 2020.

There were news reports early last month stating that Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Malam Mele Kyari, revealed that the Federal Government would no longer be paying for under-recovery or subsidy on petrol, especially due to the current development in the global oil sector. According to him, NNPC will play in the marketplace as one other marketer in the space, but will ensure the security of supply at market price.

(READ MORE: Seplat Petroleum records loss of $105.8 million in Q1 2020)

The removal of the subsidy on petrol is a critical free-market reform in our view, and we believe it is beneficial to the economy and Government finances, though it will almost certainly put pressure on consumers and small businesses, in the form of higher prices of goods and increased cost of operation. Asides the impact on Government revenues, the removal of the subsidy also removes disincentives to refine petroleum product, and may improve the balance of payments through import substitution.

There have been attempts in the past to remove the fuel subsidy, but these have not been without resistance from the populace. On May 11, 2016, petrol pump prices were hiked by around 68% from N87/litre to N145/litre and many asssumed that this signalled a full deregulation. This wasn’t the case, however, as the subsidy regime was still in place.

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READ ALSO: NLNG to embark on $6 billion capacity development project

The exchange rate factored into the landed cost of fuel was between N280 and N285/US$1. A steep devaluation in the currency and an increase in crude prices in the international market implied an increase in the landing cost, which necessitated the continuation of the subsidy regime, though now booked as underrecovery losses in the books of NNPC.

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A sharp decline in global crude prices, triggered by the global pandemic, has completely wiped out the subsidy via significantly lower landing costs, paving the way for a reduction in the pump price of petrol in mid-March. However, it is still impossible to tell if this means an end to the subsidy regime, as a return in the fortunes of the crude oil market would mean an increase in petrol prices, which would be met with stiff resistance by consumers.

READ MORE: NNPC seeks Russian firms’ partnership to revamp oil refineries  

Going by the NNPC numbers, which reported that 21.8bn litres of petrol were imported into the country through its Direct Sales Direct Purchase (DSDP) swap programme between January 2019 and January 2020, the Dangote refinery, a 650,000bpd (25.8bn litres) integrated refinery and petrochemical project under construction, will more than meet local demand. The question in the minds of many however is, “will there be sufficient cost savings from manufacturing locally to make the product cheaper?”


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly-owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission.

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Coronavirus

COVID-19 Update in Nigeria

On the 25th of September 2020, 213 new confirmed cases and 2 deaths were recorded in Nigeria

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The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 58,062 confirmed cases.

On the 25th of September 2020, 213 new confirmed cases and 2 deaths were recorded in Nigeria, having carried out a total daily test of 10,526 samples across the country.

To date, 58,062 cases have been confirmed, 49,606 cases have been discharged and 1,103 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 494,577  tests have been carried out as of September 25th, 2020 compared to 484,051 tests a day earlier.

COVID-19 Case Updates- 25th September 2020,

  • Total Number of Cases – 58,062
  • Total Number Discharged – 49,606
  • Total Deaths – 1,103
  • Total Tests Carried out – 494,577

According to the NCDC, the 213 new cases are reported from 17 states- Lagos (51), Plateau (51), FCT (29), Rivers (18), Ondo (12), Oyo (9), Osun (8), Gombe (7), Ogun (7), Kaduna (5), Enugu (4), Edo (3), Jigawa (3), Kano (3), Benue (1), Delta (1), Sokoto (1).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 19,174, followed by Abuja (5,644), Plateau (3,373), Oyo (3,248), Edo (2,620), Kaduna (2,389), Rivers (2,305), Delta (1,801), Ogun (1,796), Kano (1,737), Ondo (1,620), Enugu (1,289), Ebonyi (1,038), Kwara (1,028), Abia (881), Gombe (864). Katsina (848), Osun (826),  Borno (741), and Bauchi (692).

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Imo State has recorded 566 cases, Benue (481), Nasarawa (449), Bayelsa (397),  Jigawa (325), Ekiti (317), Akwa Ibom (288), Niger (259), Adamawa (237), Anambra (234), Sokoto (162), Taraba (95), Kebbi (93), Cross River (87), Zamfara (78), Yobe (75), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

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The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

 

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Coronavirus

Lagos launches N5 billion support fund for 2,000 low-cost private schools

The Governor said the facility will benefit low-cost schools with amounts ranging from N500,000 to N5 million.

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Lagos State government has launched a N5billion support fund to help reduce the impact of Coronavirus pandemic on low-cost private schools in the state.

This was disclosed by the Governor of the state, Babajide Sanwo-Olu via his Twitter handle on Friday.

According to him, the educational sector is one of those severely impacted by the pandemic, with schools and vocational learning-centres shut since March.

He said, “With access to funding for privately owned schools and vocational training centres in the state, we are confident that this programme, under the partnership between First Bank Nigeria and Lagos State Education Trust Fund (LSETF) will help accelerate a sustainable return to learning and skills acquisition.”

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He explained that the facility will benefit 2,000 low-cost schools with amounts ranging from N500,000 to N5 million.

“As a responsible Government, we are obligated to provide interventions that would enable learners in schools study in line with the new normal,” the Governor Sanwo-Olu added.

The Chief Executive Officer, First Bank Nigeria, Dr Adesola Adeduntan, said “With this partnership, we are sure that registered educational institutions in Lagos State will have access to funds at subsidised interest rates to meet their needs as they reopen at this auspicious time.”

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Business News

Paga Group relocates to the UK

Oviosu announced that he is very excited about moving to and working with the UK government.

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Paga records over $2 billion worth of transactions in 2019 , Paga acquires Ethiopian-based startup, Apposit, announces Paga subsidiaries

Paga Group has redomiciled from Mauritius to the United Kingdom (UK). The group is the holding company for its operations in Nigeria, México, Ethiopia, and the UK.

This was disclosed by the Chief Executive Officer and founder, Paga, Tayo Oviosu on Friday.

Why it matters: The company took the decision due to bureaucratic challenges it faced last year.

He said, “The laws and courts of Mauritius are not very fast-moving, and the rules are difficult. I’ve had one court case that was eventually thrown out after a year.

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“In the UK it would have been thrown out immediately, and the person would have had to pay us for our lawyer fees.

“Basically, not an easy place to do business. It is more painful than useful. I say stick to good ol’ America or UK or Netherlands or Luxemburg. Where you know there are professionals, and the legal system works.”

Oviosu said he is very excited about the move, looks forward to working with the UK government to promote trade with the UK.

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The Paga Group has raised $34.7 million in funding so far, according to Crunchbase.

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