25 Oct

Daily Watch – NNPC says it’s subsidising petrol, FAAC plunges 31%

  • Nigeria’s offshore rig count from June to September has reduced to seven from eleven recorded in H1, indicating that four rigs were shut down in Q3. This was contained in the Baker Hughes oil data report. Baker Hughes reported that the international offshore rig count for September 2016 was down by 47 rigs. The data stated that funding cuts by the NNPC, and growing security concerns may have triggered a significant drop in the number of offshore oil rigs involved in drilling operations. The report is, however, not in tandem with the latest (September) OPEC data which stated that Nigeria’s oil rig count remains unchanged as it stood at 24 both in June and July.
  • A new report by NEITI has shown that disbursements from the Federation Account to the three tiers of government plunged by 31 per cent in the first half of this year relative to the corresponding period of 2015. According to NEITI, the drop in revenues may negatively impact budget implementation across the three tiers of government this year, increase the size of budget deficits, and deepen the debt burden. The report, ‘FAAC disbursements in the first half of 2016 and possible implications’, is the maiden issue of the NEITI quarterly review. It analysed disbursements by FAAC in the first halves of 2015 and 2016, and highlighted possible implications for public governance and management in the country. It stated that revenues shared to the federal, states and local governments were less by over N800 billion from N2.89 trillion in the first half 2015 to N2.01 trillion in a similar period this year. This 30.9 percent decline reflected in lower allocations across the board.
  • A new report put together by Prof. Okey Iheduru of the Arizona State University showed that the annual capacity utilisation of the auto plants in Nigeria had dropped by 97 per cent, from 500,000 vehicles to just 15,000 vehicles. The Chief Economist at PWC, Dr. Andrew Navin, who noted that the auto industry was still dominated by used cars imports more than two years after the introduction of a new auto policy, also said local production accounted for only one per cent of the market. Iheduru and Navin spoke in Lagos at a symposium organised by the Lagos Chamber of Commerce and Industry, which had as its theme: ‘The Nigerian auto policy: Reality checks on the economy and the future’. Iheduru, who gave the installed capacity for the over 40 existing auto assembly plants in the country as 500,000 cars annually, said the firms could only utilise less than three per cent of that capacity.
  • ThisDay reports that that NNPC has admitted that the sale of petrol at the current market price of N145 per litre was unsustainable due to the prevailing exchange rate. NNPC also admitted that despite the preferential exchange rate made available to oil marketers to import petrol, many were reluctant to do so because they would be selling at a loss at the prevalent pump price, implying that NNPC that continues to import it was subsidising petrol. Speaking in Lagos at the 2016 Oil Trading and Logistics (OTL) Conference, the Group General Manager, Crude Oil Marketing Division at the NNPC, Mele Kyari, said there was no way petrol would continue to be sold at the current pump price. Kyari was however quick to add that the present administration would not announce another increase in the petrol pump price, because Nigerians would not accept it. According to him, legislation by the National Assembly would be required for petrol to be sold above N145 per litre.