The N4 trillion approved on Thursday by the National Assembly to fund fuel subsidy this year has been condemned by the Manufacturers Association of Nigeria (MAN), which says the action would ruin the economy.
Fuel subsidy fund was N442.72 in the budget earlier passed by the legislature and assented to by President Muhammadu Buhari. But with this new development, it has now been increased by N3.557 trillion, despite public outcry.
The lawmakers increased oil benchmark from $62 per barrel to $73 per barrel, and approved that oil production volume increased by 283,000 barrels per day – from 1.883 million barrels per day to 1.600 million barrels per day.
Arguing that placing much importance on petrol over issues of health and infrastructure was misdirected, MAN President, Mansur Ahmed maintained that subsidy was a yoke on the Nigerian economy.
‘We believe that subsidy is a yoke on our economy. First of all, the social sector is critical. Maybe people feel that fuel is so important, but if you compare it with health, education, and security, you will notice it is nowhere near them’ Ahmed argued
Corroborating Ahmed’s claim, an economist and Chief Executive Officer (CEO) of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf expressed conviction that the petrol subsidy approval would lead to higher debt service, an increase in fiscal deficit, increasing inflationary pressure, and even naira depreciation.
He warned: ‘With this development, our macroeconomic outlook in the near term should be a cause for worry. The outcomes of these approvals include increased borrowing, higher debt service, surge in fiscal deficit, heightening inflationary pressure, and a risk of further depreciation in the naira exchange rate.’
In his request to the Senate, President Buhari said: ‘The decision to suspend the removal of Petroleum Motor Spirit (PMS) subsidy at a time when high crude oil prices have elevated the subsidy cost has significantly eroded government revenues’.
Prior to the approval of the President’s request, the Senate considered a report by the Senate Committee on Finance.
Committee Chairman, Senator Solomon Olamilekan noted that the total budget deficit is projected to increase by N965.42 billion to N7.35 trillion, representing 3.99 per cent of Gross Domestic Product (GDP).
He added that ‘incremental deficit will be financed by new borrowings from the domestic market’.
He therefore recommended that the President’s request be approved.
Lawmakers took turns to make contributions to the debate on the report.
While some blamed the country’s economic downturn on crude oil theft, a few others asked that the Senate delay the approval until certain critical questions are answered.
Senator Olubunmi Adetunmbi (APC, Ekiti North) said the Federal Government and security agencies owed it a duty to stop the stealing of Nigeria’s common wealth.
At a time when many countries are reaping bountiful harvest due to the increase in crude oil prices occasioned by the Russia-Ukraine crisis, Adetunmbi wondered why Nigeria is left out owing to its inability to meet its OPEC quota.
In agreement, Senate Leader Yahaya Abdullahi, said the country should be in a state of mourning over what is currently happening to it.
He attributed the failure of security agencies to protect oil assets as a major reason for the decline of the economy and expressed worry over the increasing cases of oil theft despite huge resources allocated to the military, police and other security agencies.
Senator Betty Apiafi (PDP, Rivers West) urged her colleagues not to approve the President’s request because it ‘spells doom for the Nigerian economy’.
While she acknowledged the fact that the maritime sector has been battling with oil theft, she wondered what the Federal Government had done to reduce or stop it.
She blamed the government for spending on ‘useless consumption’ and ‘funding corruption’, while doing very little to address oil theft.
President Buhari’s request was however approved after the deliberation.