THE federal government says today that it has projected an estimated N6.72 trillion for the 2023 fiscal period for premium motor spirit (petrol) subsidy payments.
The government, however, raised concerns that if subsidy payments are retained, funds for execution of capital projects at the various ministries, department and agencies (MDA) of the Federal government would be adversely affected.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, made the disclosure in Abuja during a consultative forum on the 2023-2025 Medium Term Fiscal Framework.
READ ALSO:
Reps approve Buhari’s N4trn request for petrol subsidy
Analysts tap 2023 election as major reason for suspending petrol subsidy
Petrol subsidy cuts NNPC’s remittance to N14bn in October, least in 10 months
Labour opposes petrol subsidy removal as analysts back FG’s decision
At a time when the government ought to be rejoicing on rising fuel price globally, it is losing huge funds on subsidy payments arising from importation of petrol.
The World Bank, the International Monetary Fund and some Nigerian economic analysts had raised concerns that Nigeria was spending on petrol subsidy funds that should be expended on infrastructural projects, and had called for a complete removal of the subsidy.
Crude price has gone above the $100 per barrel mark since the Russia-Ukraine war started, and there are fears in government circles that the country may surpass its monthly fuel subsidy budget.
In January, February, March and April of this year, the Nigerian National Petroleum Company Ltd, (NNPC Ltd.) incurred N210.38 billion, N219.78 bn, N245.77bn and N271.58bn respectively for payment of fuel subsidy, spending a total of N947.51bn during the four-month period.
Also, the World Bank last month estimated that the increase in global price of crude oil would push the fuel subsidy budget of the federal government from the current N4trn to about N5trn by the end of this year.
Ahmed, on the back of these concerns, pointed out that the fuel subsidy regime was hurting Nigeria’s ability to service its debts and meet up with capital expenditure.
She called for Nigerians’ understanding on the fiscal burden of fuel subsidy, stressing that a situation whereby the federal government borrowed for consumption was wasteful.
The minister said, “As the 2023 budget process commences, the federal government is faced with two scenarios of either to retain the subsidy payment throughout 2023, which would gulp N6.72 trillion, or retain it till the end of June based on the 18 months extension announced in early July of last year.”
Both scenarios, she pointed out, had serious implications for net accretion to the Federation Account and projected deficit levels.
Giving a further insight, she said, “The projected fiscal outcomes in the medium term are presented under two scenarios based on the underlying budget parameters/assumptions, as follows:
“Scenario 1 – the Business-as-usual scenario: This assumes that the subsidy on PMS, estimated at N6.72 trillion for full year 2023, will remain and be fully provided for.
“Scenario 2 – the reform scenario: This assumes that petrol subsidy will remain up to mid-2023 based on the 18-month extension announced early 2021, in which case only N3.36 trillion will be provided for. Additionally, there will be tighter enforcement of the performance management framework for Government-Owned Enterprises (GOEs) that will significantly increase operating surplus-dividend remittances in 2023.
“Both scenarios have implications for net accretion to the Federation Account and projected deficit levels.”
In the same vein, the Minister of State for Budget and Planning, Clem Agba, described selling petrol at N200 as “a big problem”, and put the cost of producing the product alone at about N600 to N700 per litre.
“Right now, Nigeria is the only country in the world that is selling at about N165 or N200 per litre. If you call your friends or brothers in the states or in Europe or in other African countries, you will know that PMS is currently being sold at the range of N800 to N1000 per litre.
“I think that the time to remove subsidy was yesterday. We are only eating away our future, and that is what some people call consumption economy,” Agba said.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.