The federal government is proposing a N3 trillion budget to meet the funding provisions of the incremental fuel subsidy request in the 2022 Budget.
The Minister of Finance, Budget, and National Planning, Zainab Ahmed, disclosed this on Wednesday after the federal executive council meeting presided over by President Muhammadu Buhari at the Presidential Villa.
According to her, only N443 billion had been provided for in the 2022 Budget meant to accommodate subsidy from January to June, but taking the prevailing economic realities, both locally and globally, into consideration, Council had proposed a year-long provision for the subsidy.
She said the request was considered by Council, which directed the ministry to approach the National Assembly for an amendment to the fiscal framework as well as the Budget.
She said “we also presented to Council today a request for Council’s consideration to make additional funding provisions to enable us to meet incremental fuel subsidy request in the 2022 Budget. You’ll recall that in the 2022 Budget, as appropriated, we have made a provision of N443 billion for a subsidy for January to June.
“Having taken into account the current realities; increased hardship in the population, heightened inflation, and also that the measures that needed to be taken to enable a smoother exit from the fuel subsidy are not yet in place, it was agreed by Council that it is desirable to exit fuel subsidy.
“The Nigerian National Petroleum Company (NNPC) has presented to the ministry a request for N3 trillion as fuel subsidy for 2022. What this means is that we have to make an incremental provision of N2.557 trillion to be able to meet the subsidy requirement, which is averaging about N270 billion per month.
“In 2021, the actual under-recovery that has been charged to the Federation was N1.2 trillion, which means an average of N100 billion, but in 2022, because of the increased crude oil price per barrel in the global market, now at $80 per barrel, and also because an NNPC assesses that the country is consuming 65.7 million liters per day, now we’ll end up with the incremental cost of N3 trillion in 2022.
“So, this has been considered by Council and we’ve also been asked to approach the National Assembly for an amendment to the fiscal framework as well as the Budget, to also further discuss with NNPC on how to make provisions for this and also how to rationalize this expenditure”, she said.
On the vagueness of the number of petroleum products consumed in the country and how the planned N3 trillion subsidy budget would be funded, the Minister said more works would be done on the proposal.
“In the case of the budget, we’re looking at extending to December in the first instance, because this budget year is January to December and we’re going to engage NNPC to further interrogate the request that they presented with a view of trying to see how we can scale it down so that the country is not incurring N3 trillion for a fuel subsidy.
“We agreed with the view of governors, that there is a need to scale down on the size. So even as the government is not immediately removing the fuel subsidy, we have to make sure that what the nation is incurring is efficient, and that it is a real cost that has been consumed by the country.
“How do we fund it? So, we’ll have to reduce it from that N3 trillion and that is one. Secondly, also we have been running reconciliations with NNPC to reduce the cost, but also we have several reconciliations with NNPC and NNPC itself is owing in some cases, government.
“So, we want to be able to settle some of the subsidy costs through this reconciliation process. So when we’re done with that, whatever is left that we’re not able to apply to what an NNPC is owing the Federation will not be increasing the deficit. And that means increased domestic borrowing. But we haven’t finished seeing reconciliation. This is just the second day that this happened”, she explained.
She also disclosed that FEC ratified an instrument on diplomatic relations between Nigeria and South Africa.
“The first memo we presented today has to do with the confirmation of ratification of Customs Mutual Administrative Assistance Agreement between South Africa and Nigeria and the purpose for us is for the customs law in the respective territories to be properly observed to prevent and also enhance investigation and to combat customs offenses and to afford each country mutual assistance in cases concerning the delivery of documents regarding the application of customs laws in two countries.
“The importance of this for us is a cooperation between Nigeria and South Africa, as it has become even more important now with the Africa Continental Free Trade Agreement. It will also help to increase trade relations between the two countries and facilitate the exchange of information as well as strengthen our binational cooperation”, she said.