In a context of growing indebtedness, the cost of subsidies jumps by 370%
• Atiku slams FG on high loans, others
The cost of the fuel subsidy is estimated to increase by 369.93% from 2021 to 2023, Saturday PUNCH has learned.
In 2021, the Nigerian National Petroleum Corporation said the fuel subsidy gobbled up N1.43 billion, although there was no record under-recovery in January.
Minister of Finance, Budget and National Planning, Zainab Ahmed had said on Thursday during the presentation of the Medium Term Expenditure Framework and Fiscal Strategy Paper 2023-2035 in Abuja that the federal government planned to spend 6 .72 billion naira in fuel subsidies. in 2023.
However, Ahmed said the subsidy payment projection was based on two scenarios, the first being to spend around 6.72 billion naira for the whole year and the second, removing subsidies by June 2023, the government spending 3.36 billion naira rather than the full estimated 6.72 billion naira. 72 tons.
She further noted that both scenarios had implications for the net increase in the federation account and projected deficit levels.
In January this year, the federal government decided to keep the controversial fuel subsidy in place for another 18 months following threats of protests from the Nigerian Labor Congress and other interest groups.
The International Monetary Fund recently said that fear of political resistance, widespread corruption and pressure from interested groups were hampering the removal of the fuel subsidy in Nigeria.
In the first five months, Nigeria has spent 1.27tn naira on petrol subsidies, with a plan to spend 4tn naira this year.
It was also revealed that the Nigerian National Petroleum Company Limited will continue to fund the N4.19tn fuel subsidies for the financial year 2022 on behalf of the federation despite being a commercial enterprise and its position as no longer pay money to the Federation’s Accounts Allocation Committee. to be shared monthly with the three levels of government.
The rising cost of fuel subsidies is expected to persist amid falling revenues and rising debt.
According to a recent PUNCH report, the FAAC allocation to federal, state and local governments fell to $2.18 billion between January and March 2022 from the N2.24 billion disbursed in the previous quarter, the fourth quarter 2021.
The Debt Management Office recently revealed that Nigeria’s total public debt outstanding rose to N41.60 billion in the first quarter of 2022 from N39.56 billion in December 2021, an increase of 2.04 billion naira over a period of three months.
During the presentation of the MTEF and FSP document, the Minister of Finance revealed that the cost of servicing the debt exceeded the undistributed revenue of the federal government by 310 billion naira in the first four months of 2022.
It was revealed that the total federal government revenue for the period was 1.63 billion naira, while debt service gobbled up 1.94 billion naira.
The IMF also said that Nigeria is likely to rely on overdrafts from the Central Bank of Nigeria to fund its fuel subsidy bill.
The finance minister also said the federal government plans to tap 2 billion euros ($2.2 billion) of the money it raised in a Eurobond sale this year. last and aimed for more local borrowing in 2022 to help fund fuel subsidies.
The World Bank recently warned that increased fuel subsidies put the Nigerian economy at high risk, as subsidy payments could have a significant impact on public finances and pose debt sustainability issues.
Atiku slams FG
Meanwhile, People’s Democratic Party presidential candidate Atiku Abubakar said Thursday’s revelation by Ahmed that the cost of servicing Nigeria’s debt has exceeded the federal government’s undistributed revenue by 310 billion naira in first quarter of the year is very worrying.
In a statement, Atiku said, “First, this action must be in violation of all known reasonable debt sustainability thresholds. Second, it puts a big question mark over the government’s ability to manage its growing debt profile without jeopardizing macroeconomic stability. Indeed, I fear that this action will already expose Nigeria to financial stability issues as we move from medium risk of debt distress to high risk of debt distress.
“I had repeatedly warned that not only was the fiscal cost of government blind borrowing so enormous, but that it had even greater opportunity costs as we sacrifice investment in critical areas, including the education, health and other basic services.This is certainly detrimental to Nigeria’s long-term growth.
Moving forward, the PDP candidate recommended what he described as urgent steps the government must take to remedy the situation.
He said: “Take immediate action to slow the rate of debt accumulation by promoting more public-private partnerships in financing critical infrastructure and identifying more innovative financing options. Review the current use of all borrowed funds and ensure they are being used more wisely. Specifically, the government must ensure that all borrowed funds are directed to priority infrastructure projects that would generate revenue, stimulate production and put the economy on a path of sustainable growth;
“”Review the country’s debt strategy focusing on concessional and semi-concessional sources with lower interest rates and relatively long maturity. The government must reduce the issuance of short-term debt securities; take measures to improve the efficiency of its spending and significantly reduce wasteful and wasteful spending. »