Nigeria’s earnings from rising oil price wiped off by subsidy, worsening naira: World Bank
The World Bank has projected that Nigeria will not benefit fiscally from the recent rise in global oil price this year as the country continue to struggle under the weight of heavy subsidy payments amid falling naira.
The global financial body stated in its Nigeria Development Update report shared via its Twitter page on Thursday, saying that the continued payment of petrol subsidies and the decline of the country’s currency value will prevent the country from benefiting financially from the global rise in oil prices
“In 2022, as in 2021, Nigeria is not expected to benefit fiscally from higher oil prices fully. In 2021, while oil prices rose by two-thirds against the backdrop of global economic recovery from COVID-19, net oil revenues in Nigeria increased by only 4 percent, as production (including condensates) decreased from 1.83 million bpd in 2020 to 1.68 million bpd in 2021,” the report read.
According to the report, the disconnect between global oil price increases and the country’s earnings exists because “the Nigerian National Petroleum Corporation (NNPC) deducted a significant portion of the Federation’s oil revenues to pay for the petrol subsidy.”
The report further projected that the decoupling will continue in 2022, owing to low oil production, the large sum spent on petrol subsidy, the weakening value of the country’s currency, and higher apparent gasoline consumption than in the past.
As one of the major oil exporters, Nigeria is supposed to be one of the major beneficiaries of the rising price of oil which has been largely tied to the sanction on Russia following its unprovoked invasion of Ukraine.
The Central Bank of Nigeria (CBN) stated in May that the recent increase in oil prices does not, however, translate into higher revenue or an improvement in the Nigerian economy’s external reserves.
The projections come as the President Muhammadu Buhari regime drastically depleted Nigeria’s Excess Crude Account (ECA) from over $2 billion left by former President Goodluck Jonathan in 2015 to $376,655 in July, 2022.
Meant to be a savings cushion that stabilises government revenue and acts as a lifeline for the economy in difficult times, the ECA is a federal government-held savings account that is funded by the difference between the market price of crude oil and the budgeted price of crude oil as provided in the appropriation bill.
Also, Peoples Gazette on Wednesday reported that the naira crashed further in the parallel market, trading for N710 against the U.S. dollar on the exchange platform Aboki Forex.
The price of the 13 crude oil samples in the Organisation of the Petroleum Exporting Countries (OPEC) basket was $123.21 per barrel in June, but on Wednesday it fell to $100 per barrel as concerns over a slowing demand overrode reports from the sector that showed a larger-than-expected decline in U.S. crude stockpiles.
Recall that the International Monetary Fund, IMF, and World Bank have repeatedly urged the Mr Buhari regime to stop paying subsidies, stating that doing so would worsen the nation’s fiscal deficit and debt situation.
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