Page 7 - DMEA Week 27 2022

DMEA POLICY & SECURITY DMEA

CBN says high crude prices not helping

AFRICA THE Central Bank of Nigeria (CBN) has released National Petroleum Co. Ltd (NNPC Ltd), which
a report confirming that the rise in world crude said in late June that the government had spent
oil prices is not benefiting the government’s NGN253bn ($610mn) on the gasoline subsidy
finances, as spending on domestic gasoline sub- in February, up from NGN143.72bn ($346mn)
sidies is rising more quickly than oil revenues. in January.
In the report, the bank notes that Nigeria It is worth noting that the CBN report only
deposited NGN208.2bn ($496mn) worth of covers the month of February – that is, a period
crude oil and natural gas revenues into the Fed- that mostly preceded Russia’s invasion of
eration Account in February, down by 36.9% on Ukraine.
the previous month’s figure of NGN329.99bn. World oil prices were generally bullish
It further states that the country earned no between February 1 and February 23 before
revenues from oil and gas exports in February, the outbreak of war, owing to concerns about
unchanged from January, while domestic oil and the possibility of armed conflict, but to a lesser
gas sales generated NGN41.92bn in February, degree than they were after February 24.
down by 43.7% on the previous month’s figure In other words, this trend was already emerg-
of NGN74.4bn. ing well before global energy markets began
Additionally, CBN reports that the Nigerian spiking upwards and before Brent crude prices
government’s deficit spending amounted to started settling above $100 per barrel. As such,
NGN580bn in February, up by 6.5% on the Jan- future CBN reports covering the months of
uary figure of about NGN544.6bn. It attributes March and beyond are likely to note increased
the increase to the sharp month-on-month drop deficit spending by the Nigerian government –
in oil and gas revenues and increased spending especially since NNPC Ltd has already reported
on the gasoline subsidy. additional upticks in outlays on the domestic
This is in line with data released by Nigerian gasoline subsidy.™

REFINING

Barkindo: Downstream playing

a key role in price volatility

OPEC MOHAMMAD Sanusi Barkindo, the late sec- also stressed that the constraint on the down-
retary-general of OPEC, said just hours before stream sector was a global phenomenon that
his death that capacity constraints in the down- was not being addressed in a consistent way in
stream sector were making a more significant every region.
contribution to the volatility of world crude oil Overall, he stated, worldwide refining capac-
prices than many market observers realise. ity dropped by more than 330,000 barrels per
Speaking to the Nigerian newspaper Van- day (bpd) in 2021 “and remained below pre-pan-
guard, Barkindo noted that upstream opera- demic levels last year, despite the robust global
tors were all too often blamed for fluctuations economic rebound.”
in prices. Producers have become “a favourite This decline occurred despite the addition of
scapegoat for the current market conditions,” he new capacity in the Middle East, China, Africa
remarked. and India, and it occurred because refining
This focus on upstream operations overlooks capacity actually dropped among member states
the constraints created in other parts of the value of the Organisation for Economic Co-operation
chain, he said. “[This] discounts the current and Development (OECD) for the third year in
capacity challenges that also plague the down- a row in 2021, he explained.
stream, especially with regard to transportation “Comparing the pre-pandemic year of 2019
of fuel,” he said. to 2021, OECD refining capacity fell by a sig-
“Refinery closures in recent years, coupled nificant 1.5mn [bpd], or 3.3%,” he said. “Given
with a number of untimely accidents at impor- the global refining squeeze at the moment, the
tant regional refineries, have curtailed supplies construction of the Dangote Refinery in Lagos,
and helped create the energy market volatility of with its capacity of around 650,000 barrels per
recent months.” day, is a huge step in the direction of addressing
Barkindo said he had referred to this point not only Nigeria’s longer-term demand but sig-
in his keynote speech at the Nigeria Oil & Gas nificantly improving the capacity outlook of the
Conference & Exhibition (NOG) on July 5. He global downstream sector.”™

Week 27 07•July•2022 www. NEWSBASE .com P7