Several issues to be contended with by government will impact the gains negative
Indications have emerged that the recent speedy rise in oil prices at the international market is nothing to celebrate yet as the current situation on ground places the country in a critical position.
In the last few weeks, the price of crude has risen steadily from around $85 to last week’s price of $92.43, the highest since 2014, when crude was sold for $92.66, fuelling hope that it might inch closer to $100 before the end of the first quarter.
However, as refreshing as the news is, experts believe it is nothing to celebrate yet as several issues to be contended with by government will impact negatively on the gains.
In a chat with New Telegraph, the Chief Executive Officer, Petrocam Nigeria Limited, Mr Patrick Ilo,
said with subsidy bills likely to increase further by the day and as pre-election activities gather momentum, among other issues, government is likely to be distracted by huge expenses and political considerstion.
According to him, as the prices of crude are gradually increasing to $100 per barrel and above, situations in Nigeria are getting critical due to huge expenses.
He advised Nigeria and the United States of America not to rejoice over the gradual rise in the prices of Brent and the U.S. West Texas Intermediate in view of the fact that they have huge expenditures to contend with.
Citing issues such as Nigeria’s extra budgetary allocations for 2022, payment of subsidy in the next 18 months as the Federal Government has shifted fuel subsidy forward, as well as the 2023 electioneering campaign that is heating up, Ilo said that the price appreciation for some oil dependent countries like Nigeria was not something to rejoice over.
He said: “Fine, the prices of crudes are increasing for the good of both the members of the Organisation of Petroleum Exporting Countries (OPEC) and allies known as OPEC+.
“At least, the issue would enable Nigeria to garner funds that will be enough to meet its plans for 2022 budget. However, the Federal Government needs to walk with caution due to its huge capital responsibilities.
“Government is also contending with mounting subsidy payments occasioned by the decision of government to postpone subsidy by 18 months. The N3 trillion, which government budgeted for payment of petroleum subsidy might not be enough and this means that government must look for ways to shore up its revenue as soon as possible.
On election, Ilo said that the issue required a lot of money, as people that are seeking political offices do break their wallets in order to get money to spend for such activities.
He opined that elections remained big businesses in Africa, especially in Nigeria, noting that the issue had gulped a lot of money in the recent past.
These, Ilo said, were indications that the country had huge expenses to contend with now or in the future, a development, which implies that government should not spend recklessly the proceeds from oil exports.
A national publication had, last week, also quoted the Lead Promoter, EnergyHub Nigeria, Dr Felix Amieyeofori, as saying that with Nigeria approaching an election year with a transition government that would want to keep Aso Rock for the ruling party, a lot of discipline would be required to respect the principles of excess crude account policies.
According to him, “the country continues to rely on external debt which has increasingly taken a toll on our revenue for debt servicing. I do not, therefore, see a ballooning excess crude account in 2022. However, we will see a significant jump in the reserves.
“Well, since we will continue to import, of course, that will significantly impact on the landing cost under a $100/bbl crude price. That will further require a greater subsidy of the product. And given an election year, I see government playing the ostrich to satisfy the public.
“I would not want to go into an argument with government, because they keep the numbers. However, if we have to jump from 35 million to 60 million to 103 million litres without a significant impact on the economy, then, it is doubtful. This is because of the per capita consumption without equivalent per capita economic growth across the sectors.
“We should expect most things to be done in the spirit of ‘politicking’. But it is advisable for the government to focus on developing the nation’s economy while providing for the welfare of its citizens.”
Recalled that the Federal Government is seriously looking for funds to finance some of its projects. The development has resulted in burrowing in recent times, with government approaching countries for loans.