There will be more money for the 2021 budget implementation as the crude oil price on Monday hit $71/ barrel which doubles the $30 benchmark.
But the spike in crude oil price implies that Nigerians will pay more for a litre of petrol as the landing cost will also rise, experts have said.
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Brent crude on Monday rose above $70 a barrel for the first time since the COVID-19 pandemic began; while U.S. crude touched its highest in more than two years following reports of attacks on Saudi Arabian oil facilities.
Yemen’s Houthi forces had fired drones and missiles at the heart of Saudi Arabia’s oil industry on Sunday, including a Saudi Aramco facility at Ras Tanura vital to petroleum exports in what Riyadh called a failed assault on global energy security.
Nigeria had witnessed scarcity of petrol in the last two weeks with the Nigerian National Petroleum Corporation ruling out any price increase this month.
The NNPC had said it had enough stock of petrol to keep the nation well supplied for over 40 days and urged motorists to avoid panic buying while ruling out any increase.
Higher oil prices have implications — Experts
Experts, who spoke to Daily Trust on the implications of the high price of crude oil for the local market, said the government would reap big, but Nigerians might not benefit from it.
An oil and gas expert, Brown Ogbeifun said Nigeria would reap an abundance of excess in terms of income generated from oil.
“For instance, the new oil price is over $30 above the 2021 budget benchmark.
“This will mean having some money for the budget implementation instead of borrowing, and also have some excess that could go into the Sovereign Wealth Fund”, he said.
He said apart from capable of causing inflation, any further fuel price hike “also has indirect price impacts on manufacturing and transportation”.
An Abuja-based economist, Simon Galadima, said the increase in the price of crude oil “is a double-edged sword: it has both good and bad sides.
“The implication for the Nigerian economy is that government revenue will increase and foreign exchange earnings will also go up.
“When government revenue increases, that’ll mean more money to spend on education, health, infrastructure and fight insecurity.
“It also means the value of the Naira will be propped up as forex earnings shoot up. That’s less dollar scarcity hence better value for the naira”.
Another expert, Tope Fasua, said Nigeria should look away from crude oil as it would keep on fooling the country to believe it is rich.
He said Nigeria should capitalize on its abundant human resource to develop itself.
Fuel subsidy again
Director-General, Lagos Chamber of Commerce and Industry, Muda Yusuf, said NNPC might resort to fuel subsidy to bridge the gap in the landing cost and an affordable rate of petrol for Nigerians.
“We would see a resurgence of fuel subsidies and associated fiscal leakages.
“Smuggling of petroleum products will intensify. These are the flip sides of rising crude oil prices,” he said.
Deputy President, Independent Petroleum Marketers Association of Nigeria, Debo Ahmed, said “it’s not the pricing that’s a problem, but the exchange rate differential.”
“Since we’re importing and are not refining locally, you should expect that it’ll affect the price per litre.”
A member of IPMAN, Abdulrasheed Olapade, asked Nigerians to expect an increase in fuel price, saying “no marketer would sell at the government approved price when he is buying at a higher price from third parties especially as the product is not even within their reach as they have to depend on NNPC for supply.”
NNPC, Petrol Ministry mum
When contacted n Monday, the spokesman of the Minister of State for Petroleum Resources, Timipre Sylva, Garbadeen Muhammad, told one of our correspondents that the minister could only respond on Tuesday.