Home News Nigeria spends N18.4b per day on petrol subsidy, says Finance Minister

Nigeria spends N18.4b per day on petrol subsidy, says Finance Minister

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Nigeria spends N18.397 billion per day on petrol subsidy payments, according to the Minister of Finance Minister, Budget and National Planning. Hajia Zainab Ahmed.

The Minister told a House of Representatives’ ad-hoc committee investigating petroleum subsidy regime on Thursday that the figure is calculated from N283 per litre of Petroleum Motor Spirits (PMS) on 65 million litres per day.

Subsidy or under-recovery is the shortfall for the underpriced sales of PMS, better known as petrol.

The House probe covers the subsidy regime from 2013 to 2022.

The  Minister said: “For 2023, the projection is that the average daily truck out will be N64.96 million litres per day; that is about 65 million per day, using an average rate at open market rate of N448.20k and then a regulator pump price of N165 per litre. This gives us an average under-recovery, that is the difference between N165 and N448 of N283.2k.

“So, just multiply the amount of litre per day, the open market exchange rate of naira to the dollar and then, the gap between the pump price and open market price, the total amount of subsidy per day is N18.397 billion.

“So, if you are projecting for the full year, from January to December, it will be N6.715tn. If you are projecting for half a year, it will be 50 per cent of that, 3.375tn. I said earlier in the recommendations that we sent to parliament for consideration on MTEF (Medium Term Expenditure Framework) is half-year, that will be N3.357 trillion”.

Ahmed further said: “Fuel subsidy is the difference between the pump price which is now fixed at N165 (per litre) and the landing cost which we are projecting at an average of N448 per litre in 2023. Even now, the cost is around that.

“So, the PMS subsidy we are carrying today in the nation is around N283 per litre; that is what we are carrying. So, it is the difference between the pump price and the landing cost of petroleum products in the country”.

The Minister disclosed that the Federal Government had now proposed June 2023 to end payments on under-recovery between the landing cost and regulated pump price of PMS, stating that the subsidy regime was not sustainable and might force the government to borrow more in 2023.

According to her, the government has now planned for payment of subsidy for only half of next year, as contained in the 2023-2025 MTEF and Fiscal Strategy Paper (FSP).

The tenure of the Muhammadu Buhari administration ends on 28 May 2023.

Ahmed further disclosed that President Buhari transmitted the MTEF/FSP to the President of the Senate, Dr Ahmad Lawan, and Speaker of the House of Representatives, Rt. Hon. Femi Gbajabiamila, as approved by both the National Economic Council and the Federal Executive Council.

She said: “One thing that stands out in the Medium Term Expenditure Framework was that if the nation holds on to fuel subsidy as it is designed now, we will be incurring from January to December a subsidy cost of N6.4 trillion. But we suggested to the Federal Executive Council, and the Council approved that, maybe we could look at the option of exiting the subsidy (regime) half year. So, if we did that, then the cost would be N3.35 trillion, which is half of the N6.7 trillion.

“The Federal Executive Council approved the second option; that is the option that was conveyed by His Excellency, the President, to the National Assembly. But let me also say that even though this is a reduced option, it would mean that we are borrowing more than we would have borrowed if we did not have fuel subsidies.  In 2022, we are carrying the cost of subsidy throughout the whole year.

“Recall that the initial MTEF and approval by the parliament was for us to exit the subsidy by June of this year. But during the course of the year, making assessment of the difficult fiscal challenges in the economy and the hardship that our citizens are bearing due to high inflation and other challenges, we were asked to re-submit our plans and review them to include provision for fuel subsidy throughout the year 2022. That was how we came back to parliament with an incremental expense from N443 billion which we had planned to up to N4 trillion subsidy expense in 2022″.

She further said: “This situation is not desirable and it is not sustainable. It is putting the country in a very serious, dire financial situation and we do hope that we will be able to exit this subsidy regime in the shortest possible time.

“The N3.35 trillion in the approved MTEF that is now before the National Assembly for consideration could have been funds that would apply to other vital sectors of the economy such as health, education and social protection. So, we are carrying a burden and we must sit back as citizens and really assess whether it is beneficial for us to continue to do so”.

Several members of the committee, however, expressed their reservations about the payments, especially without determining the actual volume of PMS being circulated and consumed daily.

Chairman of the committee also said in part, “On the N6.7 trillion required for 2022, why I am disturbed is because the 2023 financial year is approaching by September. We will be expecting Mr President’s budget submission, and the MTEF is already before the National Assembly”.

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