Rising oil price pushes petrol landing cost higher nnpc to spend more on subsidy

A timely and relevant topic!

The Nigerian National Petroleum Corporation (NNPC) has indeed announced that the rising oil price is pushing up the cost of petrol landing, which will lead to increased subsidy payments. Here's a breakdown of the situation:

Rising oil price: The global oil price has been increasing due to various factors, including the ongoing COVID-19 pandemic, supply chain disruptions, and OPEC+ production cuts. As a result, the average price of Brent crude oil has risen to around $70 per barrel, up from around $40 per barrel in April 2020.

Impact on petrol landing cost: The rising oil price has a direct impact on the cost of petrol landing in Nigeria. Petrol landing cost is the cost of importing petrol into the country, including the cost of crude oil, refining, transportation, and other expenses. With the increase in oil price, the petrol landing cost has also risen, making it more expensive for NNPC to import petrol.

Increased subsidy payments: To mitigate the impact of the rising petrol landing cost on consumers, the Nigerian government has been providing a subsidy to NNPC to ensure that petrol prices remain relatively stable. However, with the increased petrol landing cost, NNPC will need to spend more on subsidy payments to maintain the current petrol price of around N162 per liter.

Estimated subsidy payment: According to reports, NNPC may need to spend an additional N100 billion to N150 billion per month on subsidy payments, depending on the oil price and other factors. This is in addition to the existing subsidy payments, which are already a significant burden on the government's finances.

Implications for the economy: The increased subsidy payments will put additional pressure on the government's finances, which may lead to a widening budget deficit and potentially impact other areas of public expenditure. The rising petrol landing cost and increased subsidy payments may also lead to higher inflation, as the increased cost of petrol is passed on to consumers.

In summary, the rising oil price is pushing up the cost of petrol landing in Nigeria, leading to increased subsidy payments by NNPC. This will have implications for the government's finances and the overall economy, and may require adjustments to the country's energy policy and budget priorities.