The federal government is projecting N900 billion for fuel subsidy in an estimated N11.907 trillion budget for 2022.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said at a public presentation of the 2022-2024 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) yesterday in Abuja that at least N900 billion was being projected for fuel subsidy in 2022.
The minister lamented that subsidy is exerting huge cost on the country, adding that in a particular month, N150 billion was spent on subsidising petrol.
She said: “Right now, we are subsidising consumption in Nigeria. We sell at N165 per litre when our neighbours are selling at N500 per litre. It is only the marketers that are benefiting by taking this product from Nigeria and selling it across borders. The common man is not benefiting.
“The transition is not an easy one if we have to remove the subsidy. What are the alternatives? What can we provide for citizens? So we are projecting if we will be paying at least N900 billion subsidy for next year.”
Ahmed regretted that the huge amount being channelled into subsidy could have been available in the Federation Account and shared to provide education, infrastructure and lead to a reduction in government borrowing.
“We will reduce our borrowing. We will increase the amounts that states and local governments are collecting. We are being penny wise, pound foolish to think that by giving this subsidy that citizens are benefitting. But at the end of the day, the citizens are actually the ones that are carrying the brunt of the wealthy.
“Some have two, three, four cars and they are the ones that we are subsidising. It is not helping the farmer who needs a bus from his farm to the market. But if we get rid of subsidy completely, it is not a popular view with labour,” Ahmed said.
The minister listed the key parameters for the 2022 budget to include a deficit of N5.6 trillion, an oil benchmark price of $57 per barrel, an N410.15 to the dollar exchange rate and oil production of 1.88 million barrels per day.
The budget is also to be anchored on a 13 per cent inflation rate and a 2.3 per cent gross domestic product (GDP).
On the funding of the N5.6 trillion deficit, Ahmed said it would be done through borrowing from both domestic and foreign sources at 50 per cent.
Debt service obligations are also projected at N3.6 trillion.
Ahmed stated that the draft 2022-2024 MTEF/FSP has been prepared against the backdrop of the global economic recovery amidst improved vaccination outlook and lower incidence of infection.
However, the minister said the MTEF showed that there were continuing global challenges in the aftermath of the COVID-19.
On measures to address the increasing government overdraft from the Central Bank of Nigeria (CBN) through the apex bank’s ‘ways and means’ window, the minister stated that by next year, the government would securitise the debt owed to the bank.
According to her, from next year, the federal government will stay within the five per cent limit provided by the CBN Act and the Fiscal Responsibility Act (FRA).
On the 2021 budget performance, Ahmed said a total of N973 billion had been released for capital projects as of May.
Reacting to a question on the rising deficit, the Minister of State for Finance, Budget and National Planning, Prince Clem Agba, said the deficit was trending down with the increase in revenue and reduction in operating costs.
He said the federal government was conscious of growing revenue sources, especially in the non-oil sector, adding that it is pursuing diversification of its earnings from oil to non-oil.