Victor EzejaNigeria’s Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, restated the need to end the fuel subsidy regime, disclosing that the Federal Government was borrowing money to fund it.
Mrs Ahmed who argued that the subsidy regime had become totally unsustainable, stated that the Federal Government has made provision of N3.36 trillion for fuel subsidy in the first half of 2023.
The Minister who disclosed this during a public presentation of details of the 2023 budget on Wednesday in Abuja, stated: “Fuel subsidy cost was a very high one; We have been funding it from borrowing.”
“In the 2023 budget framework, it is assumed that the petrol subsidy will remain up until mid-2023 based on the 18-month extension announced in early 2022. In this regard, only N3.36 trillion has been provided for PMS subsidy. “
Recall that the Federal Government had in July 2022, announced the intention to remove fuel subsidy due to the unbearable high cost, but the decision was met with stiff opposition by Nigerians coupled with strong threats of nationwide protests by labour unions, which forced it to extend the removal.
The minister also said there is an ongoing reconciliation between the ministry and the Nigerian National Petroleum Company Limited (NNPCL), to determine crude oil revenues and what should accrue to the federation account.
The 2023 budget of N21.83 trillion was signed into law by President Muhammadu Buhari on Tuesday.
The budget which the National Assembly increased from the N20.51 trillion proposed by Buhari to N21.83, has a deficit of N10.782 trillion which reflects a 32.7 per cent increase from the 2022 N8.17 budget deficit.
As of November 30, 2022, the deficit was N6.37 trillion, which the minister said was totally financed by borrowings, mostly from domestic sources.
Speaking on financing the deficit, the finance minister said it will be sourced mainly through domestic borrowings of N7.04 trillion; foreign sources of N1.76 trillion; N1. 77 billion from multilateral and bilateral loan drawdowns; while the balance of N206.18 billion will come from proceeds of privatization proceeds.
Speaking on the disagreement between the executive and legislative arm of government over securitisation of the N22.7 trillion borrowing from the Central Bank of Nigeria (CBN), by Ways & Means, Mrs Ahmed said her team would engage the National Assembly on that.
She said the decision to securitise the debt was to reduce the burden on the Federal Government, as interest on the Ways & Means could hit N2 trillion this year, from N1.2 trillion, if nothing was done.
“If successfully securitized, rather than the current interest rate of MPR+3per cent (19.5%), interest on the Ways & Means, it would reduce to about nine per cent,” Mrs Ahmed stated.
Recall that while signing the 2023 budget into law, President Buhari had appealed to the National Assembly to reconsider the proposal for restructuring the loan.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
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