Petrol subsidy to bite harder as oil price rises to $112 a barrel — highest since 2011

Global oil prices pulled a surprise on Wednesday, trading above $110 a barrel amid supply disruptions following Russia’s invasion of Ukraine.

The development is coming even as the United States and other member states of the International Energy Agency (IEA) agreed to release 60 million barrels of oil reserves to tame rising prices.

Brent crude climbed up 7.80% to $112.70 per barrel at 09:00 GMT+1– up nearly $8 per barrel from Tuesday and the highest since February 2011.

West Texas Intermediate Crude futures proportionally rose 7.54 percent to $110.95 a barrel.

OPEC and its allies will meet today for crucial talks on monthly output for April 2022. The oil cartel is expected to continue raising its overall production quota by 400,000 barrels per day (bpd), according to a Bloomberg survey of 18 analysts and traders.

For Nigeria, high oil prices mean high subsidy payments for the government to sell petrol below the international market rate.

In January, the Nigerian National Petroleum Company (NNPC) Limited claimed it expended N210.38 billion on petrol subsidy. For the month, the oil company did not remit any money to the federation accounts –- an action that may lead to state governments’ inability to pay salaries.

It has also earmarked N242.5 billion (about N143.7 billion for January 2022 recovery and November spot arrears of N98.8 billion) to deduct from governments’ revenue in February.

Last month, President Muhammadu Buhari asked the national assembly to approve the N2.557 trillion budget for petrol subsidy in 2022.