Nigeria earned N2.405 trillion from the oil and gas sector in the first six months of 2020 and N2.92 trillion in 2019, totaling N5.32 trillion in one and a half years, from January 2019 to June 2020.
The N2.405 trillion in the first six months of 2020 came in as oil revenue while the 2019 figure of N2.92 trillion was revenue by the Nigerian National Petroleum Corporation, NNPC, from sales of petroleum products in the country.
The earnings from the oil and gas sector in the first six months of the year represented an 8.7 percent drop compared to N2.634 trillion recorded in the same period in 2019, according to data obtained from the Central Bank of Nigeria, CBN.
Data from the NNPC, on the other hand, indicated that the 2019 earnings showed a drop by 1.35 percent from N2.96 trillion recorded in 2018.
The CBN, in its statistical bulletins, disclosed that oil revenue in the first six months of 2020, accounted for 59.68 percent of gross federally-collected revenue of N4.03 trillion recorded in the same period.
Giving a breakdown of the oil earnings, the CBN report outlined revenue in January, February, March, April, May, and June 2020 as N527.18 billion, N405.33 billion, N454.34 billion, N284.04 billion, and N281.97 billion respectively.
On the other hand, total federally-collected revenue stood at N852.07 billion, N723.75 billion, N634.51 billion, N791.01 billion and N491.51 billion in January, February, March, April, May and June 2020 respectively.
In the first half of 2019, oil revenue, at N2.634 trillion, accounted for 57.29 percent of the total revenue of N4.59 trillion.
Despite the earnings from the oil and gas sector, a significant number of the Nigerian population still live below the poverty line, as the impact of these earnings are not felt on the lives of the people.
Emphasizing the states, the Nigeria Extractive Industries Transparency Initiative, NEITI, disclosed that the financial crisis resulting in the inability of many states to meet basic needs, including payment of salaries, has led states to take turns in borrowing to survive.
“That oil-producing states in the Niger Delta region are also affected, in spite of the huge amount of money they have accessed from the special allocation called ‘13% derivation’ over decades, has increased public concern about the use and effectiveness of oil revenue management in the region.”
NEITI added that despite federal government-led initiatives, such as the Niger Delta Development Board, the Niger Delta Basin Development Authority, the Presidential Committee on 1.5% Derivation Fund, the Oil Mineral Producing Areas Development Commission, the Niger Delta Development Commission, and the Ministry of Niger Delta, to subnational governments’ use of the 13% oil revenue derivation funds, the interventions in the Niger Delta are yet to reverse or significantly improve the conditions of poverty and underdevelopment of citizens of the region.
“Put differently, the higher revenue disbursement to Niger Delta states from the Federation Accounts Allocation Committee (FAAC) on account of 13% oil derivation have raised citizens’ expectations without a corresponding delivery of performance,” NEITI stated.
NNPC earns N2.96trn from petroleum products sales
Figures available to Nogspeed Reports also showed that the NNPC earned N2.92 trillion from the sales of petroleum products in the country in one year, 2019, a drop by 1.35 percent compared to N2.96 trillion recorded in 2018.
The NNPC, in its recently released 2019 audited financial statement, stated that petroleum products sales accounted for 63.07 percent of its total revenue for the year.
In particular, the NNPC recorded total revenue of N4.63 trillion, dropping by 2.32 percent compared to revenue of N4.74 trillion recorded in 2018.
The NNPC stated that petroleum products sales include the sale of Premium Motor Spirit, PMS; Dual Purpose Kerosene, DPK; Automotive Gasoline Oil, AGO; lubricants, and other related products.
Furthermore, the NNPC financials stated that the corporation earned N1.079 trillion from the sales of crude oil, 6.17 percent lower than the N1.15 trillion revenue recorded from the sale of the commodity in 2018.
Also, revenue from sales of gas dipped by 7.35 per cent to N489.91 billion in 2019, from N528.8 billion recorded in 2018; while revenue from services appreciated by 47.9 per cent to N144.68 billion in 2019, from N97.82 billion in 2018.
The NNPC explained that the sale of natural gas represents the invoice value (fair value of the consideration) of natural gas sold to third parties; while revenue from services consists of revenue from seismic contracts, time-based contracts, and gas transmission tariffs.
Giving a breakdown of its earnings by markets, the NNPC stated that N1.06 trillion, N2.92 trillion, N489.91 billion, and N131.27 billion worth of crude oil, petroleum products, gas and services, respectively, were sold in the Nigerian market; while N665 million and N12.75 billion was recorded as revenue from services from the United Kingdom and Cyprus respectively; and N16.2 billion was recorded as revenue from crude oil sales in Panama.
The NNPC further stated that it recorded a cost of sales of N3.92 trillion in 2019, dropping by 5.31 percent, compared to N4.14 trillion recorded in 2018.
Cost centres/Cost items
The NNPC, in the 2019 audited financial statement, also gave an account of its cost centers and cost items in 2019. Giving a breakdown of these, the corporation disclosed that petroleum products expenses, which also include under-recovery stood at N2.82 trillion in 2019, compared to N2.77 trillion in 2018; freight insurance and other charges, N22.7 billion; depreciation of property, plant, and equipment, N157.6 billion; amortization of intangible assets, N17.69 billion; royalties to the Federal Government of Nigeria, N200.76 billion; gas purchase, N144.84 billion and direct good expenses, N19.91 billion.
Others are crude handling and port charges, N75.61 billion; safety, environment, and pollution control, N3.38 billion; Niger Delta Development Commission, NDDC, levy, N40.97 billion; rig site and stimulation expenses, N1.1 billion; allocated technical and production costs, N68.65 billion; pipeline maintenance costs, N6.74 billion; and flow station expenses N77.87 billion.
The rest are labor costs, N49.76 billion; production costs, N68.21 billion; technical and consultancy charges, N2.87 billion, and other operating expenses, N141.07 billion.
N508bn spent on petrol subsidy
The NNPC also spent N508 billion to subsidize Premium Motor Spirit, also known as petrol, in 2019.
The corporation disclosed that the amount spent as a subsidy, officially listed as under-recovery, represented 35.57 percent of the N1.428 trillion it remitted to the Federation Account Allocation Committee, FAAC, in 2019.
The NNPC explained that N667 billion was approved as the defrayed cost for the year 2019, from which the N508 billion was utilized for under-recovery.
It further stated that the country incurred N32 billion as crude oil and petroleum products losses, while N127 billion was utilized as pipeline repairs and management costs, as these funds were deducted from its earnings before remittances were made to the federation account.
The corporation added that it made a total cash payment of N1.428 trillion to the Federation Account, noting, however, that amount payable of N776 billion was to be made to the federation account as at December 31, 2019, being proceeds from crude oil lifting from October to December 2019.
The NNPC explained that: “Crude supplies for domestic use represents the cost of crude purchased by the corporation from the federation at the prevailing international market price for local market consumption. When the crude is converted to the refined product either through the refineries or Direct Sales Direct Purchase (DSDP), the product (that is Premium Motor Spirit) is usually sold to the local market at a price below the prevailing market price leading to under-recovery of our cost.
“These amounts are receivable to the corporation but are defrayed and charged against the amount due to FAAC on a monthly basis. Other defrayed costs charged to FAAC include crude and product losses, pipeline, and management costs.”
Impact of COVID-19 on revenues
Commenting on the impact of COVID-19 on revenues, the NNPC noted that the pandemic would impact certain areas of its finances, noting, however, that financial impact would not be severe, especially as the corporation operates in the essential class of the economy and still enjoys the privileges of arrangements to draw funds from the escrow account.
It said: “In December 2019, there was a COVID-19 outbreak which has spread globally. The outbreak has been declared a public health emergency of international concerns by the World Health Organisation (WHO) in January 2020.”
In the light of these recent developments and its underlying impact, it is expected that the impact of the COVID-19 pandemic will extend towards the following areas of the financial statements: revenue, trade receivables, and accounts payable, the corporation stated.
It stressed: “Management is confident that the financial impact of the pandemic will not be severe as the group operates in the essential class of the economy and the arrangement to draw from the escrow account has not been withdrawn.”
The NNPC added that management had also considered the potential implications of this outbreak and had put in place measures to mitigate against a significant impairment of the carrying value of assets.
It further stated that there were no plans to liquidate any of its operations or to cease trading in the near future.