By Salim Yunusa
The price of crude oil crept higher yesterday, almost hitting the $75 per barrel mark as industry data pointed to a substantial decline in United States crude stockpiles coupled with rising fuel sales in India as the country continued to show signs of recovery from the COVID-19 pandemic.
But the rising crude price has sent Nigeria’s bill for fuel subsidies rocketing, threatening to exacerbate the nation’s fragile economy.
Although Nigeria currently produces about 1.5 million barrels of crude per day, it has an almost zero refining capacity and imports roughly 100 per cent of its fuel for local consumption, negating much of the benefits oil-producing nations across the world get from high crude prices.
A plunge in the price of the commodity last year sent the country’s oil-dependent economy reeling into a recession from which it recently barely exited, while a rally has since pushed the oil price past the $70 mark.
But instead of reaping the benefits, Nigeria’s subsidy bill, borne by the Nigerian National Petroleum Corporation (NNPC), has surged beyond N100 billion, with the national oil company being unable to remit monies to the Federal Account Allocation Committee (FAAC) for two consecutive months.
The country now sits on a double-edged sword as “under-recovery” cost, the difference between what the government pays to import fuel and how much it sells the fuel for continues to wipe out the gains of the resurgence in the international price of the commodity.