Despite rising crude oil prices, revenue accruable to the Federation Accounts Allocation Committee (FAAC) from crude sales has nosedived within the last six months due to the burden of petrol subsidy, prompting the government to borrow more.
The reduction in federally collected revenue is also putting states in a tough financial position.
According to the latest figures from the Debt Management Office, Nigeria’s public debt stock stood at N41.6 trillion as of March this year, up by N2.o4 trillion in three months.
Crude oil prices remain supported by ongoing geopolitical risks and rising demand. As oil producers enjoy the benefits from surging prices, Nigeria has failed to make the most of the opportunity.
Analysts say Nigeria’s sub-optimal oil production, poor infrastructure, and fuel subsidies have deprived it of the benefits of surging oil prices.
“The current rise in global oil price is not showing in the government’s revenue. This is the time to build up reserves for a rainy day fund. In fact, the rainy day is here, but we are being beaten by heavy rains,” a professor of Energy Economics at the University of Ibadan, Adeola Adenikinju, told BusinessDay.
In a presentation on Monday, analysts at the World Bank said despite higher oil prices, oil revenue in 2022 would be lower due to larger petrol subsidies and lower production.
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Other experts say poor economic choices by the government and delays in the implementation of the Petroleum Industry Act have added more pressure to Nigeria’s federation allocation and foreign exchange inflows.
“With the current system in place, Nigeria needs more than a miracle to have positive inflows of oil remittances,” Joe Nwakwue, a former chair of the Society of Petroleum Engineers, said.
The federal government has borrowed over N19 trillion from the Central Bank of Nigeria (CBN), a development that has intensified inflationary pressures in the country.
Findings by BusinessDay showed the Nigerian National Petroleum Company (NNPC) has spent N947.53 billion on petrol subsidy this year, more than half of 2021 subsidy spending.
The FAAC document obtained by BusinessDay showed that this is the fifth 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 N271 billion for the shortfall in May 2022 during next month’s FAAC meeting.
“The value shortfall on the importation of PMS recovered from April 2022 proceeds is N271,125,127,487,58 while the outstanding balance carried forward is N371 billion,” it said.
To compound the concerns, Nigeria is currently not meeting the oil production quota of 1. 7 million barrels per day (bpd) given to it by the Organization of the Petroleum Exporting Countries (OPEC), as oil theft and pipeline vandalism continue to plague the country’s vital oil and gas sector.
OPEC’s latest data showed that the country’s production fell to 1.024 million bpd in May from 1.22 million bpd in the previous month.