Some oil companies who have released their 2021 first-quarter results are reporting earnings similar to pre-pandemic levels, but for Nigeria’s state oil company, an inability to reform continues to rain on its parade.
Saudi Arabia’s national oil company, Saudi Aramco reported net income for the first quarter this year of $21 billion, up 24 percent year-on-year, and free cash flow of $18.3 billion.
The positive result recorded by the world’s biggest oil company mirrors earnings reported by other big oil companies last week, signalling that oil is gradually making a comeback, even as that impact seems not to trickle down in one of the world’s poorest countries, Nigeria.
Royal Dutch Shell reported adjusted earnings of $3.2 billion for the three months through to the end of March. This compares positively with $2.9 billion reported over the same period a year earlier and $393 million for the fourth quarter of 2020.
Shell also raised its dividend by around 4 percent, the second increase in 6 months. Shares of oil major rose around 1.3 percent last week and the stock price has risen more than 9 percent year-to-date after falling nearly 40 percent in 2020.
British energy giant BP reported profits of $2.6 billion in the first three months of this year compared with profits of $115 million in the fourth quarter of 2020 and $791 million for the first quarter of 2020.
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The company said the results were driven by exceptional gas marketing trading performance and significantly higher oil prices and stronger refining margins.
The NNPC has not published its first-quarter earnings of 2021 but it doesn’t take a seer to understand that the oil corporation is flailing.
Some industry operators say that after shouting itself hoarse over the need to stop the wasteful fuel subsidies which it claims gulps over N100billion monthly and being ignored by the government some officials inside the corporation may have started leaking the true state of affairs to the nation.
In a leaked letter addressed to the Accountant General of the Federation, the NNPC said that it was paying the average cost of N56 on a litre of petrol as subsidy will cost N111,966,456,903.74 in February 2021, which should have been contributed to April FAAC.
“Accordingly, the AGF is invited to note that the sum of N111,966,456,903.74 will be deducted from April 2021 Oil and Gas Proceeds due to the Federation in May 2021, which will translate to zero remittance to the Federation Account from NNPC in the month of May 2021. This is to ensure the continuous supply of Petroleum Products to the nation and guarantee energy security,” the NNPC said.
NNPC’s contributions to the Federal purse which is shared by the various tiers of governments have been declining on the back of rising crude oil revenues which translates to higher cost for maintaining fuel subsidy which the corporation says gulps over a N100 billion monthly.
In contrast, Saudi Aramco is delivering a dividend worth $18.8 billion (N7.1trillion) which the Kingdom is applying to narrow a budget deficit that ballooned last year on account of the coronavirus pandemic and the shutting down of businesses.
Analysts have severally called for full deregulation of the petroleum downstream sector because subsidies on fuel are no longer sustainable.
But the government has failed to muster up the political will to effect this change even when oil prices are on the floor. It is currently in protracted talks with labour unions who have threatened to shut down the country if the government deregulates without fixing the refineries.
“As labour continues to hold their line on preconditions for full deregulation, one can then ask, how will salaries of labour be paid next month when oil revenues into the federation account will be zero par NNPC letter?” said Joseph Nwakwue, a former council chair at the Society for Petroleum Engineers (SPE) Nigeria.
Nwakwue said that the implication is that FAAC balances will be short by at least N111b and the FG, states, and LGAs will struggle to stay afloat.
“Remember that most states are unable to meet their obligations even with full remittances, so the situation will get worse. It’s important therefore that all stakeholders get together immediately to agree on a road map to navigate through this turbulence,” Nwakwue said.
