Akabueze: Why Nigeria did not reach OPEC quota
Director General of the Federation’s Budget Office, Ben Akabueze, has attributed Nigeria’s failure to meet the Organization of the Petroleum Exporting Countries (OPEC) quota to industrial-scale crude oil theft and vandalism endemic to crude oil installations.
Commenting on the fuel subsidy, which remains a drain on the economy, he also projected that Nigeria would spend more than the N4 trillion proposed for the premium automotive gasoline subsidy, commonly referred to as petrol. He alleged that the federal government has never been very honest about the cost of fuel subsidies in the country.
He said: “On the one hand, we don’t even know what we are consuming, which is a big annoyance. I listened to the National Assembly say that NNPC is the only importer of gasoline and they said they import about 63 million liters per day. How can consumption be greater than what we import?
He was speaking at the 2022 Lagos Chamber of Commerce and Industry (LCCI) Economic and Business Outlook Seminar titled: “LCCI Mid-year Economic Review and Outlook conference”, in Lagos. Akabueze also said joint ventures were the hardest hit due to increased theft of crude oil and widespread destruction of oil production facilities in Nigeria.
He said joint ventures have the highest stake in oil and gas contracts, adding that the revenue implications for the federal government were very different, with much lower stake on production-sharing contracts. He said: “There are different trade agreements in the oil and gas sector which have different implications for government revenue.
Joint ventures are the most affected due to the theft of crude oil and the destruction of oil facilities, as they represent the highest stake. “If you’re doing 500 million barrels per day, production sharing contracts, the implication for government revenue is vast in a different way, sake is much lower on production sharing contracts.”
Chairman, LCCI, Michael Olawale-Cole said the Central Bank of Nigeria (CBN) rate hike and rising cost of power, with diesel over N800/litre, Jet-A1 at N710/litre and gasoline selling above the government-regulated price of N165 per litre, would continue to drive up production costs, which could lead to restricted manufacturing and possible job losses. He said that in the third quarter, many factors will limit economic growth.
He identified them as CBN rate hikes and rate hikes by other central banks around the world. He also sounded the alarm that the deteriorating security situation in many parts of the country would continue to threaten agricultural production, manufacturing value chains and logistics.
Olawale-Cole said: “We expect to experience some budgetary constraints due to over-indebtedness accompanied by a heavy debt service burden and heavy subsidy costs.
So there are heightened fears of contracting output, limited output and recession risks as we navigate the troubled waters of 2022. “The Chamber had earlier in the year forecast a growth rate of 2.5% for the economy.
The projection was based on the assumption of sustained high oil prices, a transition to a market-reflecting exchange rate system, targeted fiscal interventions, and the gradual implementation of reforms in the oil sector.