Finance minister to Nigerians: FG to spend N6.72tr on subsidy next year
The Federal Government is set to provide for subsidy in 2023 to the tune of N6.72 trillion.
Petrol subsidy payments grew by 349.42 per cent from N350 billion in 2019 to N1. 573 trillion in 2021.
It was propelled by the rising price of crude oil in the international market and the falling value of the naira.
The cost of subsidising the product in 2020 was N450 billion. In 2022, N4.19 was approved for subsidy.
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, spoke in Abuja during the 2023 – 2025 Medium Term Expenditure Framework and Fiscal Strategic Paper (MTEF and FSP) Public Consultation.
The government, she said, has projected fiscal outcomes in the medium term (2023 to 2025) under two scenarios based on the underlying budget parameters/assumptions.
Under the first scenario, the finance minister said “the subsidy on PMS is estimated at N6.72 trillion for the full year 2023”.
This amount, she said, “will remain and be fully provided for by the NNPC on behalf of the federation”.
The second scenario, the minister explained, is that “petrol subsidy will remain up to mid-2023 based on the 18-month extension announced early 2021, in which case only N3.36 trillion will be provided for”.
The minister cautioned that “both scenarios have implications for net accretion to the Federation Account and projected deficit levels”.
Ahmed noted that “there will be tighter enforcement of the performance management framework for Government Owned Enterprises (GOEs) that will significantly increase operating surplus/dividend remittances in 2023”.
On subsidy payment after the transition of NNPC, Ahmed said “the new arrangement has indicated that NNPC will not be contributing monthly to the Federation as they used to in the past”.
From now onwards, NNPC will be paying royalties, dividends and taxes, she said.
The minister added: “So, while the revenue might not be monthly, we will work out an arrangement on how this will be paid.
“Under a new arrangement regime, NNPC will not be contributing to FAAC monthly, but NNPC will still be paying taxes, royalties and dividends.
“We will be engaging the NNPC on how we expect this to come. We can negotiate how these remittances will be done quarterly for example.
“Before the NNPC transiting, for about eight months we have not been receiving any revenues.”
Answering a question on why the NNPC is longer paying into the Federation Account, the finance minister said: “Because the NNPC has been instructed to cover the cost of fuel subsidy on behalf of the federation, this is the area that we seek to continue in 2023.
“It will still be a federation expenditure that we’re taking from the NNPC as a supplier of last resort.
“I see a situation where maybe we will soon have new refineries to fund the PMS, to invest in, buy for themselves and sell to the Nigerians.
“NNPC has been paying for subsidy but they’re doing it on behalf of the federation, even though they are the ones that have been paying.
“So, when they generate revenue instead of remitting the revenue, they’re using part of the revenue-all of them-to fund the subsidy.
“That has been the arrangement and that is what will continue to be in place until we exit scenario one.
“In reality, we have to consider what makes sense for the majority of the people and it doesn’t lie on the shoulders of the Ministry of Finance but the answer lies with Nigerians.”
Clem Agba, Minister of State for Budget and National Planning believes subsidy should have been removed.
“I think that the time to remove the subsidy was yesterday. We are only eating away at our future and that is what some people call a consumption economy.
“It is difficult to understand a situation where citizens say that they want an omelette and then when the government wants to break eggs so that they can produce they say don’t break the eggs.
“So, it’s a decision that Nigerians will have to take because if you look at scenario one, it means that we will not have any capital expenditure on 2023.
“All those who agree with us in-house that we should remove the subsidy – the political parties, the governors, the labour unions, NLC, TUC – when they come up to the public, they will say don’t remove the subsidy.
“But behind the scene when they see the books, they understand that it has to be done.
“But maybe out of lack of patriotism or to promote themselves or their parties, they say it’s the government that wants to punish the people”.
“So, Nigerians need to decide, because if we must have a future, the subsidy has to go now,” he said. Nation
