The Nigerian National Petroleum Company (NNPC) has requested a whopping N3 million for fuel subsidy in the 2022 financial year.
The request comes barely 24 hours after the Federal Government proposed an 18-month extension for the implementation of the Petroleum Industry Act (PIA), which outlaws the subsidy regime effective February.
The Minister of Finance, Budget, and National Planning, Mrs. Zainab Ahmed, disclosed this yesterday to State House correspondents after the Federal Executive Council (FEC) meeting, which was chaired by President Muhammadu Buhari.
Ahmed said: “In 2022, because of the increased crude oil price per barrel in the global market, now at $80 per barrel, and also because NNPC’s assessment is that Nigeria is that the country is consuming 65.7 million litres per day, that we would end up with an incremental cost of N3 trillion in 2022.”
She explained that a request was presented to provide additional funding to meet the incremental petrol subsidy request in the 2022 budget since the sum of N443 billion was already allocated for subsidy from January till June.
As a result, Ahmed said the Federal Government will need to make an incremental provision of N2.557 trillion to meet subsidy requirements, which currently averages about N270 billion per month.
“In 2021, the actual under-recovery that has been charged to the Federation was N1.2 trillion, which means an average of N100 billion, but in 2022, because of the increased crude oil price per barrel in the global market, now at $80 per barrel, and also because an NNPC’s assessment is that the country is consuming 65.7 million litres per day, now we’ll end up with the incremental cost of N3 trillion in 2022.
She noted that the current reality on the ground including lack of structures, for now, has necessitated the NNPC to make the request.
“Having taken into account the current realities; increased hardship in the population, heightened inflation, and also that the measures that needed to be taken to enable a smoother exit from the fuel subsidy are not yet in place, it was agreed by Council that it is desirable to exit fuel subsidy,” she said.
But when we were doing the budget we stretched that to June. So it means technically that from September, there will be a new fuel subsidy. But having to step back and take into account the realities of today, what it means is we have to go back and amend the PIA, so the Ministry of Petroleum Resources will be leading on that.
Legislative amendment
Ahmed revealed that the request was considered by the FEC, which has directed the Ministry to approach the National Assembly for an amendment to the fiscal framework as well as the budget.
She continued: “So, this has been considered by Council and we’ve also been asked to approach the National Assembly for an amendment to the fiscal framework as well as the Budget, to also further discuss with NNPC on how to make provisions for this and also how to rationalize this expenditure.
“The PIA had required that all petroleum products should be deregulated within six months of signing the PIB into law. And the six months would have meant from August to February.
“But when we were doing the budget we stretched that to June. So it means technically that from September, there will be a new fuel subsidy. But having to step back and take into account the realities of today, what it means is we have to go back and amend the PIA, so the Ministry of Petroleum Resources will be leading on that.
“They had indicated that they will be asking for an amendment to extend it to 18 months from six months. And then it means we can now also amend the budget. So the two processes will go side by side.
“In the case of the budget, we’re looking at extending to December in the first instance, because this budget year is January to December and we’re going to engage NNPC to further interrogate the request that they presented with a view of trying to see how we can scale it down so that the country is not incurring N3 trillion for a fuel subsidy.”
