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  • When Fuel Subsidy Regime Will End? By Finance Minister

    When Fuel Subsidy Regime Will End? By Finance Minister

    The Minister of Finance, Budget and National Planning, Zainab Ahmed, says the Federal Government will do away with petroleum subsidy by June 2023.

    Ahmed said this on Tuesday in Abuja during a press conference to mark the end of the 28th National Economic Summit.

    The News Agency of Nigeria reports that fuel subsidy gulped N2.565tn between January and August 2022.

    Also, in the Medium-Term Expenditure Framework, the Federal Government proposed to spend N3.3tn on fuel subsidy between January and June 2023.

    According to Ahmed, removal of fuel subsidy is part of the FG’s medium-term plan in the budget.

    She, however, said that the challenge was how to go about removing the subsidy.

    “First, we have to engage. We have already engaged with the states and the public before it was approved as part of the medium-term plan.

    “We have to do it by systematically informing the citizens about the size and the quantum of the fuel subsidy.

    “We also have to educate them about the opportunity cost of what we are unable to do because of the fuel subsidy,” she said.

    According to the minister, the fuel subsidy, in addition to budget deficit, is putting enormous pressure on the “fiscals”.

    “It is not money that we have; it is money that we have to borrow to maintain the fuel subsidy.

    “Some countries introduced subsidy during the COVID-19, and because of the Russia-Ukraine conflict, but they are using their money to fund such subsidy.

    “In our case, we are borrowing to pay the subsidy; that is double jeopardy. It is something that has to stop

    “We are glad that majority of people in decision-making positions, including the political parties, have agreed that subsidy is not sustainable.

    ”The plan is, by June 2023, we must have completely exited subsidy, and it has to be a gradual process,” she said.

  • N3.36tn Allocated For Fuel Subsidy In 2023 as Debt Profile Hits $102bn – Finance Minister

    N3.36tn Allocated For Fuel Subsidy In 2023 as Debt Profile Hits $102bn – Finance Minister

    The Federal Government says N3.36tn has been allocated for fuel subsidy in 2023 as Nigeria’s debt profile hits $102bn.

    The Minister of Finance, Zainab Ahmed, who made this known on Wednesday in Abuja, also said the 2023 budget proposal has a budget deficit of 10.78 trillion naira.

    She said this will be funded through domestic and multilateral borrowings and proceeds from privatisation.

    According to her, of Nigeria’s $102bn debt, 35% is foreign and 65% is domestic, adding that the current public debt is at 23% of the country’s gross domestic product.

    The minister also said the 2023 budget also factored in 17.16% inflation.

    According to her, the draft 2023 budget has been prepared on the background of international challenges such as the Russia-Ukraine war and COVID-19 pandemic, adding that revenue generation has been a major challenge to national development in the country.

    On the allocations for critical sectors, she said the sum of 2.05 trillion naira is allocated to education and 1.58 trillion naira for health.

    She added that 2.74 trillion naira is allocated to defense and security, infrastructure got 998.9 billion naira while social development and poverty reduction has 756 billion naira.

  • Why Nigeria should end fuel subsidy – Akabueze

    Why Nigeria should end fuel subsidy – Akabueze

    The Director General of the Budget Office of Nigeria, Ben Akabueze, says the trillions of naira spent on fuel subsidy can be deployed to other creative sectors, particularly education.

    Speaking on Arise TV’s Global Business Report, Akabueze said the funds could be used to end the Academic Staff Union of Universities strike and increase the pay of government staff.

    “The truth is that public servants need to be paid far better than they are now. It’s like the ongoing issue regarding ASUU and the pay for lecturers. I haven’t come across anyone in government who thinks that lecturers are adequately paid or who thinks lecturers should not be paid significantly more. The crux of the ASUU matter is the ability to pay. It is why this matter has dragged on because the government has refused to commit to a number that it does not have the ability to pay,” he said.

    The Federal Government will likely spend N6.7tn on petrol subsidies in 2023 if it plans to pay for the whole year.  The cost may reduce to N3.36tn if the subsidies if it remains up to mid-2023, according to the Finance Minister, Zainab Ahmed.

    Akabueze noted that fuel subsidies often had a huge impact on the economy and the lives of the people, stressing that “when you eliminate fuel subsidies or cut back on it, there will be an immediate impact on people.”

    He blamed the absence of investments in the midstream sector of Nigeria’s oil & gas industry on the existence of petrol subsidies, noting that where price was not market-driven, investors would be reluctant to commit.

    On the matter of the suspension of the telecommunications tax, Akabueze said, “I don’t know about this suspension because this (tax) is now law. Beyond what I have read in the media, we haven’t been advised on the suspension.”

    On the issue of whether Nigeria had a revenue or debt problem, he noted that Nigeria’s debt was not really in a bad shape.

    “When you look at all the other indices of debt sustainability, our debt looks okay. This is till you get to the matter of debt-service-to-revenue. That’s where Nigeria looks really bad and where we are testing the limits of sustainability. What the Minister of Finance said is that we need to address this revenue problem quickly because if we do not, then we will be faced with a real debt crisis.”

    On whether Nigeria could be forced to approach the International Monetary Fund for a bailout, Akabueze said he did not see Nigeria going to the IMF voluntarily.

    “This is a hot potato issue here in Nigeria. But the honest truth is, if we don’t address our fiscal challenges, in a sensible and sustainable manner, we may end up unwillingly approaching the IMF,” he cautioned.

    On the Central Bank of Nigeria’s Ways & Means financing of the Federal Government, which rose to N19.9tn in June 2022 and the Asset Management Corporation of Nigeria’s N5 trillion toxic assets, the DG said both were crucial debt issues that the government must make priorities.

  • I’ll remove Fuel Subsidy, Use Funds to Better other Sectors – Peter Obi

    I’ll remove Fuel Subsidy, Use Funds to Better other Sectors – Peter Obi

    Labour Party presidential candidate, Peter Obi, has insisted that Nigeria’s implementation of fuel subsidy is a ‘scam’.

    Speaking on a monitored programme on Arise Television, the former Anambra state governor while emphasizing his resolve to remove subsidy and improve critical economic sectors like power, healthcare and education said:”I will remove it and use something to offer what is equivalent to what we are removing.

    “In other words are we saying that subsidy is more important than lives and property? We must be able to say if we keep this, we will not get this. But because of mistrust, I have to say that subsidy is a scam.

    “We have to look at how much it is, who is consuming it, where are we going to keep it. There are many scams all over the place including the cost of governance.”

  • Why FG Can’t Remove Fuel Subsidy Now – Lai Mohammed

    Why FG Can’t Remove Fuel Subsidy Now – Lai Mohammed

    The Minister of Communication and Culture, Lai Mohammed, has said that the Federal Government cannot, at the moment, remove subsidies on the Premium Motor Spirit (PMS), popularly called petrol.

    Mohammed, who spoke during an exclusive interview to Reuters in London, said many other nations were introducing measures to help citizens cope with high oil energy prices, hence Africa’s most populous country could not be an exception.

    Nigeria is Africa’s largest oil exporter but still has to import almost all its fuel needs due to a lack of refining capacity. The Federal Government shelved plans to abolish fuel subsidies earlier this year, a move that raised concerns with the International Monetary Fund (IMF).

    “When you consider the chaos, the social disharmony and … instability such an action (abolishing subsidies) would facilitate, is it worth it? I don’t think so,” the Minister said.

    The Minister believes that a new industry law that allocates money to oil-producing communities would stop attacks and blamed the European Union’s climate change policies for stifling investment in the sector.

    He added, “We believe that climate change is real and important for emission control, but there is a bit of double standard in the EU policy regarding climate change,” he said.

    In addition to attacks on oil infrastructure, several parts of the north are plagued by violence orchestrated by bandits while dozens were killed in church attacks in Kaduna and Ondo States last month.

    “We are leaving the country much more secure than we met it,” Mohammed said.

    He equally noted that President Muhammadu Buhari administration has made progress made against Boko Haram since 2015.

    Nigeria suffers intermittent fuel shortages and has raised its deficit forecast twice this year and increased borrowing to cover the cost of the subsidy.

    The country’s petroleum production has also fallen short of government targets, with $1 billion in revenue lost to crude oil theft in the first quarter of this year, according to the sector regulator.

    Similarly, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) expressed worry over the rising incidents of vandalism and theft along the key pipeline conveying refined petroleum products to Mosimi, Ibadan, Ore, and Ilorin fuel depots.

    NMDPRA Chief Executive, Farouk Ahmed, said this when the top executives of the South-west Independent Petroleum Marketers Association of Nigeria (IPMAN) visited him in Abuja.

    While the nation suffers intermittent fuel shortages and has raised its deficit forecast twice this year and increased borrowing to cover the cost of the subsidy, its petroleum production has also fallen short of government targets, with $1 billion in revenue lost to crude oil theft in the first quarter of this year, according to the sector regulator.

  • Why Nigeria Has Not Removed Fuel Subsidy – Buhari

    Why Nigeria Has Not Removed Fuel Subsidy – Buhari

    President Muhamamdu Buhari has defended the federal government’s decision to keep paying fuel subsidies.

    In a response to Bloomberg, the President said the effects of removing fuel subsidies would have been too harsh on the Nigerian people.

    He said the government is working on boosting local capacity in order to stem the inflationary pressures that are likely to be triggered by a removal of subsidies.

    “Most western countries are today implementing fuel subsidies. Why would we remove ours now?” What is good for the goose is good for the gander!” The President said.

    “What our western allies are learning the hard way is what looks good on paper and the human consequences are two different things.

    “My government set in motion plans to remove the subsidy late last year. After further consultation with stakeholders, and as events unfolded this year, such a move became increasingly untenable.

    “Boosting internal production for refined products shall also help. Capacity is due to step up markedly later this year and next, as private players and modular refineries (Dangote Refinery, BUA Group Refinery, Waltersmith Refinery) come on board.

    “The exchange rate is still susceptible to external shocks that can suddenly and severely affect Nigerian citizens. As we step up domestic production – both in fuel (enabled by PIA) and food (agricultural policies) – the inflationary threat shall diminish, and we can move toward unification.”

    The President’s comment comes as parts of the country, including commercial nerve centre Lagos, battle an acute shortage of fuel.

  • NNPC to deduct N672bn as Fuel Subsidy hits N1.35tn in four months

    NNPC to deduct N672bn as Fuel Subsidy hits N1.35tn in four months

    The Nigerian National Petroleum Company (NNPC) says it deducted N245.77 billion for petrol under-recovery costs in March.

    The value shortfall comprises the previous months’ outstanding and part of the February 2022 value shortfall.

    NNPC said this in its monthly presentation to the Federation Account Allocation Committee (FAAC) meeting on Wednesday, April 27.

    In the first quarter of 2022, the data showed that petrol subsidy payments totalled N675.93 billion.

    According to the document, NNPC said it would also deduct N671.88 billion (under-recovery outstandings) from its remittance to FAAC for April — due to the federation in May.

    Under-recovery or subsidy is the underpriced sales of premium motor spirit (PMS), better known as petrol.

    “The estimated Value Shortfall of N671,882,996,685.81 (consisting of N519 billion for estimated April 2022 recovery plus N152 billion of March 2022) is to be recovered from April 2022 proceed due for sharing at the May 2022 FAAC Meeting,” NNPC said.

    According to the document, the national oil company declared zero remittance to the federation account — the third time in 2022.

    Further checks showed that, for the month of March, the gross domestic crude oil and gas revenue was 259.54 billion.

    In January, February and March 2022, petrol subsidy gulped 210.38 billion, N219.78 billion, and N245.77 billion, respectively.

    Payments for subsidies have continued to dwindle remittances accrued to the federation account. In February, the federal government postponed the planned petrol subsidy removal, citing “high inflation and economic hardship”.

    It, however, asked the national assembly to approve N4 trillion to cater for costly petrol subsidy in 2022 — as a result of high global oil prices due to the Russia-Ukraine war.

    The World Bank had advised Nigeria to rethink its steps in the petrol subsidy policy.

  • You Can’t Spend N200bn On Universities, But Can Spend N4trn On Fuel Subsidy – ASUU Tackles FG

    You Can’t Spend N200bn On Universities, But Can Spend N4trn On Fuel Subsidy – ASUU Tackles FG

    The Academic Staff Union of Universities (ASUU) has accused the Federal Government of failing to prioritise the development of university education in the country.

    ASUU President, Professor Emmanuel Osodeke, made the assertion on Wednesday during an interview on Channels Television’s Sunrise Daily.

    He decried the situation where the government is focusing its attention on fuel subsidy which he believes does not exist, rather than showing interest in revamping the nation’s universities.

    More than two months since lecturers downed tools, the ASUU president alleged that the government has been insensitive to the union’s demands.

    “A government that cannot raise N200 billion to revamp all Nigerian universities and bring them to world standard, doesn’t have money to do that but that same government can raise N4 trillion for fuel subsidy; fuel subsidy and university education, which is more important to any country that wants to move forward?” he queried during the breakfast show.

    “You can raise N4 trillion for fuel subsidy in a year, but you cannot raise N200 billion to fund your education because you don’t have money; it is a priority. You can spend N228 billion to feed children in primary and secondary schools, but you cannot raise N200 billion to fund your universities; it is an issue of priority, that is the problem.”

    Osodeke said the government has refused to make any definite move to address the demands of the lecturers since the strike which crippled activities across public universities began in February.

    According to him, nothing really has happened, and the government has not shown any sign that it is willing to resolve the issues.

    The ASUU president listed some of the issues in contention to include renegotiations of the 2009 agreement, payment system for members, and revitalisation of the nation’s universities, among others.

    He stressed that no concrete resolution was reached despite the series of meetings with the government delegation led by the Minister of Labour and Employment.

    “Really, nothing significant has happened since we declared the strike about nine weeks ago, which means that this system (government) is really not interested in anything about education,” Osodeke stated.

    “If all universities are shut down for about nine weeks and there is no single comment from the government’s side, it shows that something is really wrong.”

  • Fuel subsidy puts Nigerian Economy at High Risk – World Bank

    Fuel subsidy puts Nigerian Economy at High Risk – World Bank

    The World Bank says increasing fuel subsidy puts the Nigerian economy at a high risk as subsidy payments could significantly impact public finance and pose debt sustainability concerns.

    The Washington-based lender said this in a new biannual report known as Africa’s Pulse.

    According to the bank, Nigeria is projected to have a 3.8 per cent growth in 2022, adding that as an oil-dependent country, weak oil production hampers economic recovery.

    It added that the increasing fuel subsidy poses a high risk to the country’s economic growth, despite the increase in oil prices.

    The bank said, “Growth in Nigeria is forecast to increase to 3.8 per cent in 2022 and stabilise at 4 per cent in 2023-24. Real GDP growth was revised up by 1.2 percentage points for both periods compared with the previous forecast. Nigeria’s economy is still dependent on the oil sector. Oil-related revenue contributes 40 to 60 per cent of fiscal revenue, while oil and gas account for 80 to 90 per cent of total exports.

    “Weak oil production, below the OPEC quota, held back the recovery process. Although at a slower pace than the average seven per cent during the boom period, growth prospects for the Nigerian economy are somewhat bright thanks to high oil prices coupled with reforms initiated by the passing of the Petroleum Industry Act and the completion of the Dangote refinery expected in 2023.

    “Risk remains high on increasing fuel subsidies, which could weigh heavily on public finance and pose debt sustainability concerns. Nevertheless, public debt as a percentage of GDP is currently moderate.”

    According to the World Bank, the high level of oil prices will affect countries that are shielding the impact on their consumers through fuel subsidies, such as Nigeria and Ethiopia.

    It added that the high cost of fuel subsidies, due to the increase in oil prices, may deteriorate the country’s fiscal balance.

    In 2021, the Nigerian National Petroleum Corporation said fuel subsidy gulped N1.43tn, although there was no record for under-recovery in January.

    The National Assembly has approved N4tn as fuel subsidy bill for 2022, which is an increase of 179.72 per cent over the previous year’s subsidy bill.

    However, experts have warned the Federal Government that the N4tn fuel subsidy bill would adversely affect the country’s economy.

    The Country Director, World Bank, Shubham Chaudhuri, had said Nigeria’s decision to postpone the full deregulation of the downstream sector of the petroleum industry by 18 months might cost the country over N4tn in subsidy payments on petrol in 2022.

    The World Bank country director, however, noted that while the World Bank could come up with advice on subsidy removal, its role was certainly not to dictate as it had no ability to do such.

    Chaudhuri said, “With economics, really, you are not meant to make a political decision. What you are meant to do is to lay out what are the cons and consequences of different decisions.

    “So that is what we are doing, we are just being very clear that this would come with a fiscal cost and the fiscal cost is the number, perhaps N4tn this year.”

    He said despite the fact that the price of oil had gone up, the rise in global crude oil prices was not helping Nigeria that much.

    Industry figures seen on Sunday showed that the price of Brent, the crude against which Nigeria’s oil is priced, was $118.11 per barrel at 5.06pm Nigerian time, as it traded at the same rate the preceding day.

  • Buhari Writes Senate, sends N2.557trn Supplementary Budget for Fuel Subsidy

    Buhari Writes Senate, sends N2.557trn Supplementary Budget for Fuel Subsidy

    President Muhammadu Buhari has submitted the 2022 Appropriation Act amendment proposal to the National Assembly.

    In the amendment proposal, the President earmarked the sum of N2.557 trillion for fuel subsidy.

    The amendment proposal is contained in a six-page letter sent to the House on Tuesday.

    In the letter, President Buhari is asking the National Assembly to approve the sum of N2.557 trillion supplementary budget for petrol subsidy from July to December 2022.

    Senate President Ahmad Lawan and Speaker of the House of Representatives Femi Gbajabiamila read the letter in their respective chambers.

    In the letter, President Muhammadu Buhari said the amendment is necessary to accommodate some issues in the country including Petroleum Subsidy which must be considered.

    He is also asking the National Assembly to review the Finance Act 2021.

    Accordingly, President Muhammadu Buhari in the letter said it was imperative to remove all capital projects that were replicated on the 2022 Appropriation Act.

    The Senate in December passed the 2022 budget of N17.126 trillion, jerking the appropriation bill by N735.8 billion.