The Nigerian National Petroleum Company (NNPC) Limited has deducted another N271.13 billion as a shortfall for the importation of petrol (subsidy) in April 2022.
Just recently, Nigeria, the leading African economy and most populous on the African continent, was removed from the list of emerging markets sovereign recommendations that investors should be ‘overweight’ in by JPMorgan for her inability to take advantage of the current oil high prices at the international markets.
JPMorgan is a global leader in financial services, offering solutions to the world most important corporations, governments and institutions in more than 100 countries.
According to Reuters, the bank analysts said Nigeria’s national oil company (NNPC) did not transfer any revenue to the government from January to March this year due to petrol subsidies and low oil production.
The implication is that no single dollar had been paid into the federal government account since this year due to petrol subsidies and low oil production despite the rise in crude oil price in the international market
Subsidy or under-recovery is the underpriced sales of premium motor spirit (PMS), better known as petrol. So far, NNPC has spent N947.53 billion on petrol subsidy this year — more than half of 2021 subsidy spending. NNPC said this in its monthly presentation to the Federation Account Allocation Committee (FAAC) meeting on Tuesday, April 24. The FAAC document showed that this is the fourth time the oil company will not remit any fund to the federation account in 2022 — as subsidy payments continue to deplete revenue. NNPC also said it would deduct N371 billion for the shortfall in May 2022 during next month’s FAAC meeting. “The Value of Shortfall on the importation of PMS recovered from April 2022 proceeds is N 271,125,127, 487,58 while the outstanding balance carried forward is N371 billion,” the document seen by The Cable reads. Furthermore, “The estimated Value Shortfall of N 874 503 649 663 98 bn (consisting of arrears of N 371 billion, plus estimated April 2022 Value Short Fall of N 503 313 767 828 14 is to be recovered from May 2022 proceed due for sharing at June 2022 FAAC Meeting.” In January, February and March 2022, petrol subsidy gulped 210.38 billion, N219.78 billion, and N245.77 billion, respectively. Payments for petrol subsidies have continued to dwindle federation revenue. This year alone, the federal government has budgeted to spend N4 trillion and may rise to N6 trillion, on costly petrol subsidies — as a result of high global oil prices due to the Russia-Ukraine war. In the month under review, the report said NNPC lifted overall crude oil of 8.80 million barrels (export domestic crude) in March 2022, representing a 10 per cent decrease relative to the 9.77 million barrels lifted in February 2022. (The Cable)
The economy is facing various
challenges typified by rising rate of budget deficit, unemployment, shortage of foreign exchange, among others,
In the forex market, for instance, the Naira is at the psychological resistance rate of N600/$ and Diaspora flows are falling below expectations.
Similarly, the nation’s external reserves, reeling under the rising inflationary pressures, dipped $216.9million, within the last four days, from $39.01 billion as at May 13, to $38.795 billion as May 19, representing a 0.56 percent decline
Ironically, the same economy has been experiencing ‘high liquidity‘, particularly outside the banking system ocassioned by high level leakages at various level of governance.
Paradoxically,while the country’s expenditure on subsidies continues to rise because of the price of crude oil which has remained above $100 per barrel, which should have been a blessing for the economy and the citizens, impoverishments have become the lots of many Nigerians.
Analysts use overweight and underweight to broadcast recommendations on buying or avoiding stocks of certain sectors.
They attach an overweight recommendation to a stock that they believe will outperform its sector shortly.
For Nigeria with higher deficit budget, sourcing funds from both local and international markets have become inevitable, and the developments, both within and outside the economy might discourage investors, and according to an analyst, “the circle of poverty continues, “.
