By Tony Obiechina, Abuja
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed on Thursday said that payment of fuel subsidy by the Federal government will cost an estimated sum of N6.7trn next year.
Consequently, she has warned that should the government decide to retain the fuel subsidy in the 2023 fiscal year, this will amount to totally wiping out Capital Expenditure for the execution of capital projects by Ministries, Departments and Agencies.
The Minister gave the warning during a consultative forum on the 2023-2025 Medium Term Fiscal Framework organised by the Budget Office of the Federation (BoF) in Abuja.
Ahmed who expressed worries that the fuel subsidy regime was hurting Nigeria’s ability to service its debts and meet up with capital expenditure, called on Nigerians to understand that retention of fuel subsidy was affecting operations, adding that the federal government borrowing for consumption was wasteful.
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 which would gulp N6.72trn or retain it till the end of June based on the 18 months extension announced in early July of last year.
According to her, both scenarios have serious implications for net accruement to the Federation Account and projected deficit levels
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 N3.36trn 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.”
The Minister also disclosed that the federal government has so far released the sum of N4.72trn to finance some of the expenditure items contained in the 2022 budget.
Ahmed explained that out of the N4.72trn spending, the government released N1.9trn for debt service while personnel costs and pensions gulped the sum of N1.26trn, adding that the balance of N773.63bn was spent by the federal government on capital projects.
On revenue performance, the minister explained that between January and April this year, the federal government generated the sum of N1.63trn.
She said out of the N1.63trn, the sum of N285.38bn came from oil revenue which represents 39 per cent performance, while non-oil revenue collection was put at N632.56bn representing about 84 per cent performance.
Also speaking, the Minister of State for Budget and Planning, Prince 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 in PMS itself in the neighborhood is about N600 to N700 per liter.
“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 the 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 all consumption economy. I find it difficult to understand a situation where citizens say that they want Omelet and when the government wants to bring egg so they can produce Omelet, they say no don’t bring it yet.
“So, it’s a decision Nigerians will have to agree to it. 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’s means we will only have about N1trn 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 per cent of the budget but this doesn’t meet up to that expectation.
“So, the answer to this really lies in what the citizens wants. Unfortunately, all those who agree with us in house that we should remove subsidy, all the political parties, governors in the country, the labour unions, NLC, or TUC, when they come out in the public, they will say don’t remove the subsidy, but behind the scene they understand that it has to be done.
“But maybe out of lack of patriotism or in other to promote themselves, or their parties they say it’s the government that wants to punish its citizens. But Nigerians really need to decide if we must have a future then subsidy needs to go now.”
In his remarks at the Forum, the Director -General of the Budget Office of the Federation, Mr Ben Akabueze said that Nigeria is currently going through significant fiscal challenges.
Speaking on the challenges, Akabueze said while Nigeria had improved transparency and accountability in the oil sector, more work needed to be done in boosting revenue.
He said, “Our country is going through significant fiscal challenges. As you would hear shortly when the minister will give her presentation which will indicate our contribution and challenges.
“It is our hope and visions that when the time comes, you will engage in providing solutions and suggestions about what we could do or what we could do better or more in addressing these challenges.
“As you can see, the challenges are well instituted and well articulated but of course you would really think that we have misdiagnosed the problems, I can’t wait to hear your own perspective to these problems.
“The point I am making is let this should not be a session of simply recounting or looking over the challenges but one that is intended to improve our own thinking better and how to address these well known challenges.”
