The Federal government said it would target more local borrowing in 2022 in addition to the $2.2bn raised via Eurobond to fund fuel subsidy payments.
In September 2021, Nigeria raised $4 billion through Eurobond issuance.
Subsidy or under-recovery is the underpriced sales of premium motor spirit (PMS), better known as petrol.
Zainab Ahmed, Minister of Finance, Budget, National Planning, disclosed this while speaking with Reuters on the sidelines of an Arab-African conference in Cairo.
Ahmed said Nigeria would not tap the Eurobond market this year.
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“Rising oil prices have put us in a very precarious position … because we import refined products … and it means that our subsidy cost is increasing,” she said.
The minister said that the government was working with lawmakers to boost revenues and that the rise in oil prices means that borrowings will increase more than planned.
Oil prices have been on the rise following Russia’s invasion of Ukraine.
This has raised petroleum landing cost, thus widening market price and actual cost per litre.
For Nigeria, high oil prices mean high subsidy payments for the government to sell petrol below the international market rate.
The country depends almost entirely on imports to meet its domestic gasoline needs, even though it is a crude oil exporter. It is also facing shortages after recently importing off-spec petrol.
The government had planned to stop subsidy payments on petroleum products from July this year — but reversed its decision in January, extending it by 18 months instead.
It budgeted about N3 trillion for petrol subsidy in 2022.
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Meanwhile, oil prices fell more than 5% on Monday to the lowest in nearly two weeks amid hopes for progress toward a diplomatic end to Russia’s invasion of Ukraine – a development that would boost global supplies – while a pandemic-linked travel ban in China cast doubt on demand.
Brent futures fell $5.77, or 5.1%, to settle at $106.90 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $6.32, or 5.8%, to settle at $103.01.
That was the lowest close for WTI since Feb. 28 and the lowest for Brent since March 1. Both benchmarks have surged since Russia’s Feb. 24 invasion of Ukraine and are up roughly 36% so far this year.