In the wake of the 2019 general elections, Nigeria’s fuel subsidy payments shot up by 1,174 per cent, as the Nigerian National petroleum Corporation, NNPC, disclosed that it paid N206.585 billion as under recovery in January and February 2019, an increase of N190.37 compared to N16.212 billion recorded in the last two months of 2018. Nigeria’s 2019 general election took place, February 23 for the presidential and National Assembly elections and March 9 for the governorship and state assemblies’ elections.
Under recovery, also known as fuel subsidy is the cost the NNPC is incurring to subsidise the price of Premium Motor Spirit, PMS, also known as petrol, ensuring that it is sold at fuel retail stations at the regulated price of N145 per litre, even when the real market price is above the regulated price. Since 2017, the NNPC had been the sole importer of PMS in Nigeria and it deducts cost for under recovery before making remittances to the Federation Account.
Ironically, the naira remained stable within these periods, while the price of crude oil in the international market remained low. In November and December 2018, the price of crude oil in the international market averaged N64.75 per barrel and $57.36 billion per barrel respectively, while in January and February 2019, crude oil price averaged $59.41 per barrel and $63.96 per barrel. In October 2018, when crude oil hit the 2018 high of $81.03 per barrel, the NNPC recorded under recovery of N40.5 billion.
In its Monthly Financial and Operations Report for May 2019 published yesterday, the NNPC stated that it recorded under recovery of N104.347 billion in January 2019, rising by 682 per cent or N91.011 billion from N13.336 billion recorded in December 2018.
The amount paid as under recovery by the NNPC, according to the report, dropped by 1.9 per cent to N102.338 billion in February 2019, an equivalent of N2.009 billion.
The amount declared as under recovery by the NNPC in November 2018 stood at N2.876 billion, dropping sharply from N40.53 billion recorded in October 2018.
Furthermore, the report revealed that the amount recorded as subsidy by the NNPC in January and February 2019 alone, was more than the amount spent on the same item from July 2018 to November 2018, which stood at N206.3 billion. Specifically, in July, August, September, October and November 2018, the report noted that the NNPC declared under recovery of N51.2 billion, N65.9 billion, N45.8 billion, N40.5 billion and N2.9 billion respectively. In particular, In November 2018, when the average price of crude oil, according to global energy data firm, IndexMudi, was $64.75 per barrel, the amount the NNPC declared as subsidy was N2.876 billion; while in December 2018, when the price of crude oil dropped to $57.36 per barrels, the NNPC declared N13.336 billion as subsidy. In a sharp contrast, In January 2019, when crude oil averaged $59.41 per barrel, the NNPC declared N104.347 billion as fuel subsidy, while it deducted N102.338 billion as subsidy when the price of crude oil averaged $63.96 per barrel.
