Zainab Ahmed, minister of finance, budget and national planning, says petrol subsidy is “hurting the nation” and limiting the federal government’s ability to service debt.
The World Bank, in its Nigeria’s Development Update (NDU), launched on Tuesday, projected that fuel subsidy would gulp N5 trillion in 2022 — more than Nigeria’s N4 trillion subsidy budget.
“With oil prices going up significantly, and with it, the price of imported gasoline, we now estimate that the foregone revenues as a result of gasoline subsidies will be closer to 5 trillion Naira in 2022,” the report reads.
This year alone, NNPC has spent N947.53 billion on petrol subsidy payments.
Speaking at the hybrid launch of the World Bank’s report, the finance minister urged Nigerians to understand that petrol subsidy is causing a massive fiscal burden, thus impeding the country’s economic growth.
She said important investments in the oil and gas sector are being delayed because of the heavy fiscal burden of fuel subsidies.
“This premium motor spirit (PMS) subsidy is costing us an additional N4 trillion than was originally planned. So, this is an unplanned deficit,” Ahmed said.
“We have gone to the National Assembly; we have gotten approvals, but the approval was simply for us to cut down on some of the investment costs.
“So, investments that we needed to make in oil and gas sector which we are delaying and deferring to a later time and reducing the rollout of those investments. But we also had asked that we needed to borrow more which is very serious.
“Already we have borrowing increasing significantly and we are struggling with being able to service debt because even though revenue is increasing, the expenditure has been increasing at a much higher rate so it is a very difficult situation.
“So Nigerians need to understand that this PMS subsidy we are carrying now is hurting the nation, it’s impeding the government’s ability to be able to invest in human capital development.”
According to her, the N4 trillion earmarked for payment of fuel subsidy this year could have been invested in the health or education sector.
“But we are investing it (N4 trillion) in consumption, which is very wasteful, How many Nigerians own cars that are benefiting from this subsidy?” she asked.
She said Nigeria was facing many challenges on multiple fronts as the country is unable to gain from the current oil price rally.
“We are at some kind of crossroads. It is not hearsay to say that Nigeria has not derived what it should from the current high crude oil prices, rather rising crude oil prices are posing significant fiscal challenges to our economy and may lead to some negative receipts and indeed we have started seeing already those negative receipts,” Ahmed added.
“There are three factors preventing Nigeria from fully benefiting from the current boom in the international crisis.
“First of all, our prediction had fallen below Nigeria’s estimated capacity and the OPEC quota because of insecurity vandalism and theft.
“Secondly, the domestic price of payments has remained fixed, while global PMS prices have continued to rise.
“The third is that rising international crude prices also increase the burden of PMS because we buy refined petroleum products.
“The higher crude oil price goes in the global market, the more we’re paying for PMS, and by maintaining this PMS subsidy we as a country, unfortunately, forego investments that will have used the monies into essential infrastructure, goods or services that would have increased the overall productivity of the nation. So this is really the bane of the major issue that we’re facing now.”