Oil Price Soars In The International Market, As FACC Distributes N574.6888 Billion To Federal, States And LGAs

By Elizabeth Chukwuma

 President  Vladimir Putin , of  Russia Federation invasion of  Volodymyr Zelensky ,home country, Ukraine, on Thursday, February 23, 2022,  to forestall  it from joining the North Atlantic Treaty Organisation, NATO, appears to have driven up Crude oil  price in the international market.  The situation has been  made worse  by the disparity between  supply and demand  for Crude oil in the International market. 

The Value News  Magazine which has been monitoring the developments  in the international oil market since  hostility broke out between  Russia Federation and Ukraine, last year, could authoritatively reveal that it has positively impacted on the oil price in the international market, which many believe  is good for the Organisation of Petroleum Exporting, OPEC, member countries, particular, Nigeria.

Recall that in announcing the 2022, annual budget in December 2022, President Muhammadu Buhari, a retired Army General, had put the oil benchmark, at $57 per barrel, oil production pegged at 1.88 million barrels and exchange rate of N410.15 to a dollar. Although the government had targeted that the oil price will rebound to $62 per barrel following the tension between Russia and Ukraine but it never went beyond the forcast.

The Katsina born Nigerian President who had dragged Nigeria  into the World Bank, and other International Financial Organisations including the Asian country of China, to borrow money to finance basic infrastructural projects  across the country due to lack of funds. He  can now heave a sigh of relief  that the oil price has rebound at the International market.

  There is no gainsaying the fact that the Russia Federation full military invasion into Ukraine last Thursday had forced the oil price in the international market to rise above $100 a barrel, raising the possibility  of a return to the price of oil some 14 years ago.

President Putin Of Russia Invasion Of Ukraine, Pushes Oil Price Up, In The International Market

Security  experts  view  the Russia Federation attack  on Ukraine  as the largest  of such  military operations  in Europe since the Balkan wars  of the 1990s and possibly the world war II which had sparked concerns  about supply disruptions,  during a period of uncertainty  in   the global economy underpinned  by  COVID 19,  worries and oil supply –chain bottlenecks.

Market analysts fear that the oil price would still soar as the Ukraine conflict  would increase  the risk  of disruptions  to Russian oil and gas supplies coupled with the sanctions from the North American country of the United States of America, US, United Kingdom, UK, France, Germany and other Western powers.

They noted that since the  war has come  to heartland of Europe,  oil prices  are likely to approach  $130 per barrel  by June , 2022 and even higher as the conflict  disrupts  Russian  trade flows .  Russia, according to oil watchers, is the third largest producer of oil in the world, after the United States a and the Arab country of Saudi Arabia. Russia alone , produces 10.5 million barrels per day , which is about 11% of the world total output.

President Biden: Mobilises , G7, Leaders, To Impose Sanction On Russia, Further Pushing Up Oil Prices In The International Market

 President  Joe Biden , of the US, may has set the stage for  oil price to further go up in the international market  in the next three months  as he  unveiled  additional  sanctions against  Russia for invading Ukraine against  all repeated  ‘’ international appeals and warnings’’.

Note that  UK, imports 6% of its Crude oil needs  and 5% of gas  from Russia. But with the US and European Union  including UK sanction against Russia, it has impacted positively  on the international oil market  that that it has affected  the country’s oil supplies to its major foreign  Customers, and thus shut up the demand for OPEC member countries oil supplies.

Recall that after talking with the allies from the G7, the US President, Biden had announced measures which analyst had said would cripple Russia ‘’to do business in world major currencies, along with  sanctions  against banks  and state-owned companies.  Indeed, the current tension in the heartland of Europe, has become so worrisome that major buyers of Russia oil are no longer finding it easy  to open Letters  of Credit from Western Banks  to cover purchases  due to the sanctions.

Letters of Credit from the bank guarantee the seller’s bank that payment will be mad in full and on time. OPEC member countries may have taken advantage of the dsruptions in the Russian oil production level to push up its  production and supplies in the International oil market to meet up the Customers demand worldwide. This is because of the high demand for OPEC Crude, particular, Nigeria’s brent Crude, described as one of the best in the world.   Nigeria brent crude prices have never traded at $130 since July 2008 but heading to that with the tension in Europe. 

IOil price was said to have risen by 15 percent in January 2022, with the  global benchmark crossing  $90 a barrel for the first time in seven years, even when Russia had not invaded Ukraine. With the rising oil prices in the International oil market, President Biden of the US,  had promised last November   to release  50 million barrels  of oil from  the nation’s strategic reserves to relieve  the pressure  on Consumers but that appears not to have made  much  of a difference to the difference to the importers.

While the major oil importing  countries  are crying over the rising oil price in the International oil market, the  situation appear different in Nigeria. The Federation Accounts Allocation Committee, FAAC, had distributed N574.668 billion between the Federal government, states and Local governments in January 2022.

Hajia Ahmed: Minister Of Finance

 Out of the N574.668 billion shared by FACC, the Federal, states and local government Areas, Value Added Tax, was said to have accounted  N191.222 billion  and non-oil revenue, N100 billion. In encouraging the Hameed Ali, a retired Army Colonel, led Nigerian Customs Service, NCS, and the FIRS, and other revenue geneationg agencies  to sustain the drive may have informed why  the Buhari Administration has sustained the monthly   payment of the cost of collections  that was said to have been initiated  by former President Olusegun Obasanjo without defaulting.  The then Obasanjo Administration had approved 7%  and 4%, respectively,  monthly cost of collection  for the NCS and FIRS, to boost their revenue drive.

  FACC, may have taken advantage of the distribution  of the N574.668 billion to the three tiers of government, in which the Federal government got N204.580  billion, states, N179.251 billion, and Local governments, which is third tier of government, N58.959 billion  to distribute the N25.421 billion, total deductions of the cost of collection  of revenue and payment  into the Federation Account,   to  the  NCS, FIRS and other revenue generating agencies.

Given the soaring oil price in the  International  market due to the tension in Europe and disparity in supplies and demand for oil, in the recent time, Hajia Zainab Ahmed , minister of Finance, Budge and National  Planning the  states Commissioners of Finance, should be happy that they  would have more money to share between the second and fourth quarter of the year , as the oil price continues to soar. in the International market.

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