While the higher price of Brent crude soared close to $75 per barrel, and should have been a sign of hope for Nigeria’s economy, the federal government is at a cross road because it would also imply an increase in the cost of fuel subsidy.
According to data, the oil price hit $74.93 a barrel, up $1.42 cents or 1.93 percent, while the US West Texas Intermediate (WTI) climbed 2.61 percent or $1.87 to trade at $73.66 per barrel.
Both benchmarks have risen for the past four weeks on optimism over the pace of global COVID-19 vaccinations and expected pick-up in summer travel.
This concern was recently highlighted by Mr. Mele Kyari, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), who warned that states may not receive anything from the FAAC because the country spends about N112 billion monthly subsidizing fuels due to the inefficient state of the nation’s refineries, which are currently in comatose.
At the time he made this statement, oil price was at $68 per barrel with daily consumption of petrol at 55 million litres per day.
With the price of oil approaching $75 per barrel, the N112 billion monthly subsidy claims might balloon to more than N200 billion.
Speaking in April at the fifth edition of the special ministerial briefings coordinated by the presidential communications team, Kyari said while the actual cost of importation and handling charges of petrol amounted to N234 per litre, the government was selling the product at N162 per litre.