Macroeconomic Report & Economic Updates

Nigeria Economic Update (Issue 30)

Figures from NNPC’s latest performance report show that the corporation spent ₦206.6 billion on subsidizing fuel in two months –January and February 20194. This amount increased by over ₦190 billion, from the ₦16.2 billion spent in the previous two months – November and December 2018. Classified as under-recovery costs by the NNPC, the huge two-month spending on fuel subsidy is only partially due to increased importation of petrol during the review period. Volume of petrol imported into Nigeria rose to 3.8 billion litres in both January and February 20195, compared to the 3.4 billion litres imported in the previous two months. Most of the increase in under-recovery costs was due to low domestic crude payments in the review period, falling from ₦331.7 billion in November and December 2018 to ₦65.8 billion. Given that domestic refining capacity remains weak and the lack of political will to deregulate energy prices, substantial resources will continue to be gulped by fuel subsidy in subsequent periods. Going forward, NNPC will need to improve its domestic refining capacity to enhance its ability to meet payment obligation to the Federation Account on the 445,000 barrels/day allocated to the corporation.

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