Nigeria, which was until a few months ago the biggest oil producer in Africa, would have racked up huge windfall from crude oil sales this year on the back of high global prices but for the lingering challenges in its energy sector. Its peers such as Saudi Arabia have raked in massive profits from oil sales this year.
Africa’s largest economy has seen petrol subsidy and debt servicing gulp a big chunk of government revenues.
Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), said last month that the official foreign exchange receipt from crude oil sales into the country’s official reserves had dried up steadily from above $3.0 billion monthly in 2014 to absolute zero dollars.
“Subsidy payments, operation costs and low oil production are factors that limit the remittance of foreign earnings to CBN,” Etulan Adu, an oil and gas production engineer, said.
The state-owned Nigerian National Petroleum Company Limited covers the fuel subsidy from its profits and sends what is left to the government, he said.
“It is simple; a large chunk of Nigeria’s FX goes into payment of petrol subsidies,” said Ayodele Oni, an energy lawyer and partner at Bloomfield law firm.
For Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, the dollars earned from crude sales are used for the importation of refined petroleum products.
“It is in and out,” he said. “The sales made from crude oil are going back into importing petroleum products into the country.”
According to the data from the National Bureau of Statistics (NBS), Nigeria’s petrol import bill hit an all-time high of N4 trillion from January to September 2022, the highest in four years.
Jide Pratt, chief operating officer of Aiona and country manager of Trade Grid, said the higher the price of crude oil at the international market due to the Russia-Ukraine war, the higher the amount that will be spent on petrol imports.
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“The cost of hiring vessels (freight cost) across international waters has increased and this means the associated costs are higher and so is the import exposure. Sadly, as we all know, the higher the logistics cost for crude, the higher the subsidy payments,” he said.
As a result, the federal government is now cash-strapped, a development that has resulted in huge borrowings to fund ballooning budgets, further adding to the debt servicing obligations to local and international creditors.
The Nigerian Upstream Petroleum Regulatory Commission, in its oil production status report, showed that Nigeria produced less than 1 million bpd in August and September.
Analysts say lower oil production arising from crude theft and subsidy payments for refined petrol have crimped foreign exchange receipts from crude oil sales.
Nigeria’s foreign trade transactions fell to N11.59 trillion in the third quarter of 2022 from N12.84 trillion in the previous quarter owing largely to low oil sales, new data released by NBS have shown.
Crude oil exports stood at N4.66 trillion, indicating a decrease of 21.15 percent when compared to the N5.9 trillion recorded in Q2. It however increased by 15.70 percent compared to N4.02 trillion in Q3 2021.
“A huge amount is going into debt servicing, subsidy and government expenditures because of the current budget deficit the government runs as,” Adu said.
