According to Ahmed Zainab, Minister of Finance, Budget, and National Planning, the Federal Government intends to use €2 billion ($2.2 billion) raised in a Eurobond sale last year by this month or next, with more local borrowing planned for 2022 to help fund a subsidy on Premium Motor Spirit, also known as petrol.
On Tuesday, it was also revealed that Nigeria’s crude oil production fell from 1.399 million barrels per day in January to 1.258 million barrels per day in February.
According to the latest monthly oil market report for March 2022 released by the Organization of Petroleum Exporting Countries, this indicated a daily crude oil production loss of 141,000 barrels in the month of February 2022.
Speaking on the sidelines of an Arab-African conference in Cairo, Egypt, Ahmed told Reuters that the €2 billion that the Federal Government intends to tap is needed to fund subsidy following the rise in global crude oil prices.
The recent spike in crude oil prices caused by the Ukraine conflict has increased the cost of refined petroleum products.
Due to the dormancy of the country’s refineries under the management of the Nigerian National Petroleum Company Limited, refined products are largely imported into Nigeria.
Ahmed, on the other hand, stated that the country will not enter the Eurobond market this year.
“Rising oil prices have put us in a very precarious position… because we import refined products… and it means that our subsidy cost is really increasing,” the minister was quoted as saying by Reuters.
To avoid a nationwide protest by labor unions, the Federal Government reversed a pledge to end petrol subsidies in January and instead extended the subsidy regime by 18 months.
However, oil prices have recently risen, and Nigeria is almost entirely reliant on imports to meet its domestic petroleum product needs.
Despite the fact that Nigeria is a crude oil exporter, this is the case. The country is also experiencing PMS supply shortages as a result of the delivery of some unusable substandard products.
In a letter to the National Assembly in February requesting additional funds to pay for the petrol subsidy, President Muhammadu Buhari (retd.) stated that the country’s budget deficit would rise to 4% of GDP as the government considers new domestic borrowing. The initial target for the deficit was 3.42 percent of GDP.
According to Reuters, petrol subsidies cost Nigeria up to $7 billion in revenue per year, and Ahmed stated that the government was working with lawmakers to increase revenues, and that the rise in oil prices meant that borrowings would increase more than planned.
