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AfrOil PERFORMANCE AfrOil
It also said that the problem had been exacer- bated by high production costs, falling invest- ment, divestment by international oil companies (IOCs) and a harsh operating environment.
Asue Ighodalo, NESG’s board chairman, pointed out that Nigeria’s federal government would benefit greatly from having access to additional income. Abuja has been running a deficit because public debt is outpacing revenues and will have to borrow money to finance this year’s budget outlays, he noted. These circum- stances are unsustainable over the long term, he argued.
“Nigeria is not appropriating the benefits of high global [oil] prices. As a result, fiscal pres- sure is imploding because of declining revenues and soaring public debt,” Ighodalo commented. “Only recently, the Minister for Finance alerted Nigerians that the cost of debt servicing has surpassed [the] federal government’s retained revenue as total public debt continues to rise. Meanwhile, the Central Bank of Nigeria’s Ways and Means financing to the Federal Govern- ment peaked at NGN19.6 trillion [$46.81bn] as of May, and the country maintains an unsustain- able fuel subsidy regime.”
He went on to say that NESG strongly recom- mended that Nigeria’s federal government work to improve revenue collection in the oil sector, as problems in this area were making a huge con- tribution to the national debt.
“Government must take decisive action to tackle its revenue challenges, which cannot be divorced from leakages through oil theft, dif- ficult operating environment for businesses, and lack of innovation in tax collection,” Ighod- alo stated. “The challenges have resulted in low accretion to the nation’s revenue base. We strongly believe these leakages have continued unabated because of the absence of sanctions and ineffective tax systems.”
He also expressed strong reservations about Nigeria’s long-standing policy of subsidising domestic prices for gasoline and other commod- ities, asserting that the current arrangements
were not transparent enough to make their true costs evident. “We strongly advise greater transparency and simplicity in the management and communication of various subsidies, like in petroleum products and electricity, to establish their true costs that benefit the people,” Ighodalo said in the statement.
Nigeria’s government was actually supposed to eliminate gasoline subsidies in February 2022, in line with the provisions of the Petroleum Industry Act (PIA) adopted last August. How- ever, officials in Abuja decided in late January of this year to postpone this politically unpopular move for 18 months. It did so at a time when fuel shortages were widespread across the coun- try and a number of powerful labour groups, including the Nigerian Union of Petroleum and Natural Gas Workers (NUPENG), were threat- ening to strike.
As a result of the postponement, Abuja is now expected to spend NGN6 trillion ($14.33bn) on gasoline subsidies this year and has already budgeted NGN6.72 trillion ($16.05bn) for next year’s subsidy payments. ™
Mele Kyari (C), the head of NNPC Ltd, took EU officials on a tour of a vandalised oil pipeline last month (Photo: Twitter/@nnpclimited)
NUPRC data show Nigerian crude oil production down 12.5% y/y in H1-2022
NIGERIA
NIGERIAN liquid hydrocarbon production, including crude oil and gas condensate, sank to about 1.4mn barrels per day (bpd) in the first half of 2022, down by 12.5% on the same period of last year, according to data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) cited by Vanguard.
This is at least the second year in a row that Nigerian liquids production has dropped in the
January-June period, the NUPRC data showed. Output sank to 1.6mn bpd in the first half of 2021, down by 9.6% on the previous year’s fig- ure of 1.77mn bpd, according to official figures.
Nigeria’s government attributes the persis- tent downturn in production to theft and sab- otage – that is, to illegal diversion of crude oil and condensate by thieves who remove it from pipelines.
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