IN a staggering move that is sure to capture the attention of Nigerians and global energy stakeholders alike, the Central Bank of Nigeria (CBN) said it has released a monumental $2.97 billion to fuel the country’s oil sector in the last two years.
This massive financial injection is aimed at supporting the importation of petroleum products and related essentials.
This funding, which was distributed between 2022 and the first quarter of 2024, comes at a time when Nigeria is grappling with a historic energy crunch, plagued by fuel shortages and skyrocketing import bills. But here is where it gets really intriguing: this move to funnel billions into fuel imports persists despite the much-celebrated launch of the Dangote Refinery. Many had hoped the refinery would ease the nation’s reliance on imported petroleum products, but for now, the foreign exchange is still flowing out of Nigeria to sustain these imports.
Fuel imports remain a dominant force in the Nigerian economy. They have become a primary consumer of the nation’s foreign exchange, causing significant strain on Nigeria’s foreign reserves. The ripple effects are evident, as the pressure on the naira continues to mount.
The oil sector, once hailed as the backbone of Nigeria’s economy, is now becoming a financial burden, with billions of dollars going toward the same product Nigeria should ideally be producing locally.
A deeper dive into the numbers, based on CBN’s 2024 first-quarter statistical bulletin, reveals some jaw-dropping figures. In 2022 alone, the CBN released an incredible $1.41 billion to fuel imports. Yet, in 2023, the figures took a sharp downturn, dropping to $1.03 billion, a remarkable 26.9 percent decline.
Fast forward to the first quarter of 2024, and we see the bank releasing a hefty $522.9 million to fund fuel imports. While this represented a small fraction, 0.01% of the $4 billion spent on imports during this period, it also marked a staggering 12.86 percent increase compared to the $463.3 million spent during the same period in 2023. It seems the oil sector’s thirst for foreign exchange is unrelenting.
The detailed breakdown of foreign exchange usage for fuel imports paints an even more captivating picture. In 2023, for example, a whopping $173.88 million was spent in January alone. February saw a slight dip to $137.67 million, but by March, the figure had bounced back to $151.75 million. This rollercoaster of spending continued as fuel imports consumed $132.36 million in April and $117.92 million in May. The unpredictability of these figures highlights the instability of the market. June saw a curious rise to $89.85 million, a seemingly minor increase, but in the grand scheme, it is a significant amount of foreign exchange bleeding from the country.
The drama doesn’t stop there. Shockingly, in July 2023, Nigeria utilised only $45.82 million for petroleum imports, and by August, the figure hit rock bottom at zero.
Zero dollars were spent in August on importing fuel. But it wasn’t long before the spending surged again, with $42.43 million used in September, $38.46 million in October, $51.95 million in November, and $52.14 million by December. It’s a tale of relentless expenditure, a cycle that Nigeria seems unable to break.
The story doesn’t end with CBN’s figures. Enter the National Bureau of Statistics (NBS), whose second-quarter 2024 data sends shockwaves through the energy sector. According to the NBS, Nigeria’s import of Premium Motor Spirit (PMS) otherwise known as petrol hit an eye-watering N3.22 trillion. This marks the highest import bill for PMS in Nigeria’s history. Even more astonishing, petrol imports accounted for a staggering 25% of all imports in that period.
It is a troubling figure for a country that has long been the largest oil producer in Africa. The N3.22 trillion bill is more than just a number; it is a reflection of Nigeria’s growing dependence on imported petroleum products. In the first quarter of 2024 alone, the petrol import value reached N2.6 trillion. For perspective, this is a 100% increase compared to the same period in 2023, where the bill stood at N1.6 trillion. By the time the first six months of 2024 came to a close, the cumulative petrol import bill had surged to N5.8 trillion.
To put it bluntly, Nigeria’s fuel import bills are spiraling out of control. Between the first quarters of 2023 and 2024, the petrol import bill has nearly doubled, from N3.1 trillion to N5.8 trillion— an alarming 87.09% increase.
The continued reliance on foreign exchange to import fuel is creating a vicious cycle. With the naira weakening and foreign reserves under pressure, the cost of fuel is bound to remain volatile, further affecting prices at the pump and everyday goods and services. While the Dangote Refinery offers a glimmer of hope, its full impact on Nigeria’s fuel import reliance has yet to be felt.
In the meantime, the CBN’s $2.97 billion release to the oil sector could be seen as both a lifeline and a burden. It keeps the fuel flowing but at the expense of the nation’s financial stability. As Nigerians brace for the next chapter in this unfolding drama, one thing is clear: the stakes have never been higher.
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