April 26, (THEWILL) – After losing N2.3 trillion revenue to oil theft in 12 months, Nigeria, Africa’s largest economy, has secured a $800 million facility from the World Bank to cushion the effects of the planned oil subsidy removal on the “most vulnerable”, poor Nigerians.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, said that the $800 million World Bank facility was the first tranche of the palliatives to be disbursed through cash transfers to about 50 million Nigerians, who belong to the most vulnerable category of the society.
Paradoxically, Nigeria has lost an opportunity to produce and sell about 65,700,000 barrels of oil in the last one year due to issues related to pipeline vandalism and the resultant oil theft that the government showed lack of capacity to contain.
This translates to about N2.3 trillion loss in oil revenue based on the prevailing exchange rate and average oil price in the international market.
The Chairman of Shell Companies in Nigeria, Dr. Osagie Okubor, who disclosed this at the recent Nigerian International Energy Summit held in Abuja, said the 180, 000 barrels per day Trans Niger Pipeline (TNP) had remained shut for more than one year — March 2022 to March 2023.
The loss from March last year to March this year brings the total shut-in/loss to about 65, 700, 000 barrels.
Brent crude prices averaged about $83 per barrel from March 2022 to March 2023, meaning the country could have lost as much as N2.3 trillion to the avoidable ugly circumstance.
The TNP, a Joint Venture operated by SPDC is a major pipeline capable of transporting about 180,000 barrels of crude per day to the Bonny export terminal.
Speaking at the NIES event, Okunbor said the TNP remained shut for one year due to the massive crude oil theft on the pipeline.
The pipeline, according to Shell, is part of the gas liquids evacuation infrastructure, critical for continued domestic power generation and liquefied gas exports.
He said, “What keeps me awake today as regards my onshore business in Shell is the fact that we cannot operate a pipeline, and that’s what is responsible for 60 percent capacity. I think today that is almost just how much gas we can supply.
“And this is because one of our key gas infrastructures — the TNP — was shut down for one year; we removed 460 illegal connections on that line. We just reopened that line. Today we are struggling to catch up with our first programme.”
Okunbor emphasised that the loss cannot be overlooked as affecting Nigeria’s oil production quota to the Organisation of Petroleum Exporting Countries, adding that the situation was also having devastating implications on the supply of gas to Nigeria’s Liquefied Natural Gas.
“So, if you ask me what the number one issue has to be for the incoming administration, it has to be the security of oil and gas infrastructure. If you don’t fix it, then we have a huge problem on our hands,” Okunbor said.
The Nigerian National Petroleum Corporation Limited (NNPCL) had disclosed in January that it spent 4.39 trillion Naira ($9.7 billion) on petrol subsidy in 2022, a cost it blamed for dwindling public finances. The Federal Government budgeted N3.36 trillion ($7.5 billion) to spend on petrol subsidy until mid-2023 when the subsidy is planned to be scrapped.
The $800 million World Bank palliative package had drawn flak from experts who expressed the concern that it would worsen the country’s economic woes with a huge debt profile, and that its implementation efficacy is doubtful.
They experts argued that the share of the subsidy palliative for those it is meant for is infinitesimal and would offer literally little or not real benefits compared to the huge pains the subsidy removal will impose on the citizens.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
