The Federal Government yesterday said it plans to spend about N6.72trillion fuel subsidies in the 2023 fiscal year, which is estimated as more than 35% of the entire budget.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, disclosed this during a consultative forum on the 2023-2025 Medium Term Fiscal Framework and Fiscal Strategic Paper (MTEF and FSP) Public Consultation, in Abuja.
Despite its transition to a limited liability company, Ahmed said the amount “will remain and be fully provided for by the NNPC on behalf of the federation.”
She however warned that the subsidy spend will affect the availability of funds for all government’s Ministries, Department and Agencies (MDAs) to spend for execution of capital projects.
She also expressed concern that the fuel subsidy regime was hurting Nigeria’s ability to service its debts and meet the capital expenditure, and that it was also causing a massive fiscal burden whereby the federal government borrows for consumption, which was wasteful.
Budget scenarios
She said as the 2023 budget process commences, the Federal Government is faced with two scenarios of either to retain the subsidy payment throughout 2023 or retain it till the end of June based on the 18 months extension announced in July last year.
She continued: “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 N3.36trillion will be provided for. Additionally, there will be tighter enforcement of the performance management framework for 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.”
She noted that both scenarios, she stated, have serious implications for net accretion to the Federation Account and projected deficit levels.
The Federal Government is faced with two scenarios of either to retain the subsidy payment throughout 2023 or retain it till the end of June based on the 18 months extension announced in July last year.
Also speaking, the Minister of State for Budget and Planning, Clem Agba, said the removal of fuel subsidy lies in the hands of Nigerians.
He said: “PMS being sold at N200 is still a big problem; the cost of production of PMS itself is in the neighbourhood of about N600 to N700 per litre.
“Right now, Nigeria is the only country in the world that is selling at about N165 or N200. 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.
“…So, it’s a decision Nigerians will have to agree to. Because if you look at scenario one, it means that we will not have any capital expenditure next year, there will be no capital expenditure and then taking care of recurring expenditure will be a huge challenge.
“In scenario two where we say let’s take it up to June, it means we will only have about N1trillion left for capital expenditure. And when you look at our budget over the years, we have tried to ensure that the minimum capital that we spend is about 30% of the budget but this doesn’t meet up to that expectation.”
