Oil money losses can fund revamping old refineries or build new ones to end imports
By Jeph Ajobaju, Chief Copy Editor
Figures from the Central Bank of Nigeria (CBN) and Organisation of Petroleum Exporting Countries (OPEC) are a stark reminder of how losses from oil sales alone can fund the infrastructural projects of Muhammadu Buhari without borrowing.
Debt Management Office (DMO) Director General Patience Oniha confirmed on 17 March in Abuja that Nigeria’s debt rose to N39.55 trillion in December 2021.
She spoke on the same day Nigeria raised $1.25 billion additional loan through Eurobonds, part of N150 billion bond issuance planned for 2022 and beyond.
Besides, the International Monetary Fund (IMF) announced in April that it will soon grant Nigeria and 11 other African countries a loan of $40 billion.
The Eurobonds, the coming IMF loan, and any other loan Nigeria obtains from 2022 onwards will add to its N39.55 trillion cumulative debt as of 2021. The country already spends 90 per cent of revenue on servicing loans.
However, the refineries in Porth Harcourt, Kaduna, and Warri lost a combined N1.6 trillion between 2014 and 2019. When that is added to the N713 billion spent on fuel subsidy in the fourth quarter of 2021 (Q4 2021) it totals N2.31 trillion.
That N2.31 trillion is enough to fund the N2.3 trillion Presidential Infrastructure Development Fund for the
- Lagos-Ibadan Expressway
- Second Niger Bridge
- Abuja-Kaduna-Zaria-Kano road and
- Mambilla hydropower project without borrowing
This is just one example out of many in the oil sector alone. Other sources of fund leakage include bribery, contract padding, fake contracts, ghost workers, non-remittance of funds to the treasury, and stealing cash from the treasury.
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Other revenue losses
Some of the other sources of oil revenue loss calculated by Nairametrics are listed below. Oil production numbers are quoted from OPEC figures.
1. Oil production loss – $752m (January 2022)
Nigeria’s oil output was 1.39 million barrels per day (bpd) in January 2022 (260,000 barrels 1.68 million bpd OPEC quota). Average price of Brent crude in January – $86.51 pb.
- Daily realised loss – $25 million
- Monthly realised loss – $752 million (N309 billion, at N411/$1)
2. Oil production loss – $1.3b (February 2022)
Oil output was 1.26 million bpd (440,000 barrels below 1.70 million bpd quota). Average price of Brent in February – $97.13 pb.
- Daily realised loss – $42.7 million per day.
- Monthly realised loss – $1.3 billion (N526.9 billion, at N411/$1)
3. Oil production – $1.72b (March 2022)
Oil output was 1.23 million bpd (490,000 barrels below 1.72 million bpd quota). Average price of Brent in March – $117.25 pb.
- Daily realised loss – $57.45 million
- Monthly realised loss – $1.72 billion (N708.39 billion, at N411/$1)
4. Oil not accounted for in 2019 – 107.23m barrels
A report by federal Auditor General reviewed by lawmakers shows 107,239,436.00 barrels of crude lifted for domestic consumption were not accounted for by the Nigerian National Petroleum Company (NNPC) in 2019.
According to Statista.com, the average price of Brent in 2019 was $64.3 pb.
- That means $6.8 billion worth of oil not accounted for. The naira equivalent is N2.2 trillion – at N306/$1 (2019 exchange rate). Almost 25 per cent of the N8.83 trillion federal budget in 2019.
5. Discrepancy in NNPC remittance – $1.6b
The report offederal Accountant General for 2019 says only N608.7 billion ($1.4 billion) remittance was received from the NNPC, less than N1.27 trillion ($3 billion) it claimed to have handed over to the treasury.
6. Taxes owed by oil firms – $6.2b
A report by the National Extractive Industries Transparency Initiative (NEITI) says nearly 100 oil and gas companies operating in Nigeria owe N2.6 trillion ($6.2 billion) in taxes, royalty, and concessions on rentals.
7. Kaduna refinery – N64.3b loss
Kaduna Refinery did not generate revenue in 2018 but recorded N64.3 billion loss.
8. Three refineries – N1.6b loss
If the N1.6 trillion losses of the refineries in Porth Harcourt, Kaduna, and Warri from 2014 to 2019 are added to N713 billion fuel subsidy in the fourth quarter of 2021 (Q4 2021), they total N2.31 trillion.
This amount is enough to fund the N2.3 trillion Presidential Infrastructure Development Fund for the
- Lagos-Ibadan Expressway
- Second Niger Bridge
- Abuja-Kaduna-Zaria-Kano road and
- Mambilla hydropower project without borrowing
9. Fuel subsidy – N1.4tr
Fuel subsidy cost N1.4 trillion in 2021. Total oil revenue was N542 billion between January and December 2021 – kilometres adrift of N2.5 trillion projection.
10. Oil production stolen – 80%
More than 80 per cent of oil output does not get to the terminals because of theft. Stakeholders say only 5 per cent pumped through pipelines between October 2021 and February 2022 was received by producers.
11. Oil stolen yearly – $4b
UBA Chairman and oil stakeholder Tony Elumelu tweeted earlier this year that Bonny Terminal that should receive over 200,000 barrels of crude daily, receives less than 3,000 barrels. This led Shell to declare a force majeure.
At current prices, the missing barrels are worth over $4 billion a year.
12. Oil price rises 49%, revenue up only 0.2%
A CBN report shows that oil revenue for the 10 months to October 2021 (10M 2021) was N4.03 trillion, up 0.2 per cent on N4.02 trillion in 10M 2020 despite oil prices increasing 49 per cent during the period.
13. Oil reserves 37b barrels, output 1.23m bpd
Nigeria has 37 billion barrels of oil reserves. The United States has 36 billion barrels. Nigeria produces 1.23 million bpd, according to the latest OPEC report. The US produces 11.6 million bpd.
Nigeria lays claim to Africa’s top oil producer but on a global scale, the saying that “empty barrels make the loudest noise” is more apt.
14. No impact of ECA on employment
The Excess Crude Account (ECA) saves revenue from the sale of oil for the rainy day.
Four administrations withdrew $107 billion from the ECA between 2004 and April 2018 but there has no reduction in the rate of unemployment, which rose from 13.4 per cent in 2004 to 23.10 per cent in 2018. It is 33.5 per cent in 2022.
15. Oil output sliding for 12 years
The last time Nigeria produced up to 2.5 million bpd was in 2010 (12 years ago). Production has been on a slippery slope ever since.
16. Refineries’ TAM loan – $1.6b
Abuja obtained a $1.6 billion loan for Turn Around Maintenance (TAM) of the refineries in 2012. It approved $1.5 billion to revamp Port Harcourt Refinery in 2021.
That added to the last five months’ subsidy will fund the new refinery Egypt just built for $4 billion to produce 4.7 million litres of refined products a year.
17. Exaggerated daily consumption
TheNNPC disclosed in June 2021 that daily consumption of fuel increased from 60 million litres to 103 million litres. Daily consumption was about 50 million litres in February 2021.
The figures are inflated so the excess can be smuggled to neighbouring countries that sell fuel at about three times higher than between N162 and N165 per litre in Nigeria.
18. Nigeria loses Indian market to Russia
India is the largest buyer of Nigeria’s oil but Russia has offered to sell its oil at a discounted $35 pb because of international sanctions.
Nigeria’s crude has struggled to find buyers with India buying more of Russia’s Ural in March than it did in entire 2021.
Nigeria sells Bonny light at $105 pb. It has turned to Europe but there are still no buyers as the European market is well supplied.
