By Michael Eboh
Despite low crude oil prices, the Nigerian National Petroleum Corporation (NNPC) spent N58.34 billion to subsidise the consumption of Premium Motor Spirit (PMS), also known as petrol in the country, in two months, February and March 2020.
According to data from its Monthly Financial and Operations Report for March 2020 obtained yesterday, the NNPC stated that the amount spent in February and March, represented a 16.59 per cent decline compared with the total of N69.94 billion spent in subsidizing the commodity in December 2019 and January 2020.
The declining prices of crude oil in the international market had forced the Federal Government to, on March 18, 2020, slash the price of PMS from N145 per litre to N125 per litre, based on the prevailing prices of crude oil then, occasioned by the global COVID-19 pandemic.
It had stated then that subsidy had been eliminated by the low price of crude oil, and that the country would not bring back subsidy, while it took the opportunity to deregulate the downstream petroleum sector.
At the end of March, the government further slashed the price of PMS to N123.50 per litre, citing existing market fundamentals, especially the low price of crude oil. However, by July 1, 2020, the government hiked the price to N143 per litre, citing rising crude oil and petroleum products prices.
Giving a breakdown of subsidy figures in the two-month period, the NNPC stated that N20.68 billion was paid as subsidy, also known as under-recovery, in February 2020; while N37.66 billion was spent in March.
On the other hand, the NNPC reported that N26.63 billion and N43.31 billion was recorded as under-recovery in December 2019 and January 2020 respectively.
To this end, the report noted that the NNPC had spent N101.65 billion to subsidise PMS in three months, from January to March 2020; while it spent a total of N609.46 billion to subsidise PMS consumption from March 2019 to March 2020.
Within this same period, the report disclosed that NNPC’s remittances to the Federation Account stood at N52.37 billion in December 2019; N46.85 billion in January 2020; N75.63 billion in February 2020 and N69.19 billion in March 2020.
Crude oil prices
In its analysis of global crude oil price, the NNPC, in the report, stated that in February 2020, the average crude oil price further plunged by $8.24 or 13.45 per cent month-on-month (m-o-m), to average $53.03 per barrel, adding that ICE Brent declined by $8.20 or 12.9 per cent m-o-m, at $55.48 per barrel while NYMEX WTI dropped by $6.99 or 12.1 per cent m-o-m, to close at $50.54 per barrel.
It noted that between January and February 2020, ICE Brent decreased by $2.47 or 4.0 per cent to $59.77 per barrel, while NYMEX WTI increased by $1.03 or 1.9 per cent to stand at $54.21 per barrel.
In March 2020, the NNPC stated that the average crude oil price tumbled by $21.54 or 40.62 per cent m-o-m, to average $31.49 per barrel; the highest monthly drop since the 2008 financial crisis and the lowest m-o-m price since September 2003; while ICE Brent waned by $21.75 or 39.2 per cent m-o-m, at $33.73 per cent; and NYMEX WTI dropped $20.09or 39.8 per cent m-o-m, to close at $30.45 per barrel.
The refineries connection
Nigeria continued to incur cost on subsidy following the inability of the country to fix its moribund refineries and commence domestic refining of crude oil, as the NNPC disclosed that in February 2020, the three refineries processed no crude and utilized no finished products, adding that combined yield efficiency was 0.00 per cent owing largely to on-going rehabilitation works in the refineries.
It further disclosed that in March 2020, only Port Harcourt refineries processed 81,772 metric tonnes (MT) of crude oil with no finished products by any of the three refineries, adding that combined yield efficiency of the three refineries was -4.46 per cent (plant consumption) owing largely to on-going rehabilitation works in the refineries.
However, irrespective of their dormancy, the NNPC disclosed that in March 2020, the refineries recorded a combined expenditure of N10.878 billion; revenue of N573 million, and a trading deficit of N10.305 billion.
In addition, for the first three months of 2020, the NNPC report revealed that the three moribund refining facilities recorded earnings of N4.22 billion; expenses of N33.5 billion and a trading deficit of N29.27 billion.