Reviewing Nigeria’s Downstream Sector

Oman_Saih_Rawl_Gas_CentralAnalysts at Ecobank say a removal of fuel subsidies could reduce gasoline consumption while continued retention of the subsidy regime is likely to constrain the performance of downstream operators.

Dolapo Oni, Head of Energy research at Ecobank says that subsidy leads to borrowing more, affects profits, liquidity and the ability to even carry out major capital expenditure, for operations and expanding storage, to build more facilities. On the Federal Government’s plans to provide 100billion naira at the end of Q3, Oni believes it will be difficult.

He said, the government is tied between a decision to either increase or get a supplementary budget. The 2015 budget allocates only 100billion naira for gas and half of it has already been spent.

There is still a bit of dispute on what is being owed the marketers. “In August, we are expecting to see Warri and Port Harcourt come on stream and they will add about 9million litres.

Based on NNPC figures, we consumed 47million litres daily last year. If we take 40 million daily this year, 9 million litres will only be about 20% of consumption, so we still have to import and we are going to import 2.1billion litres, which roughly comes down to about 23 million litres daily.

So that’s about 33 million meaning there will be shortage of about 7million litres daily.” Oni told CNBC Africa. He concluded by saying there could be some constraints, which can be waived away with the fact that consumption could actually drop if there is adequate power supply.

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