The Minister of Finance, Budget and National Planning, Zainab Ahmed, has disclosed that in efficiently meeting up with subsidy bill for the current year, the Federal Government has proposed N3 trillion budget to meet the funding provisions in the 2022 Budget.
She explained that though N443 billion had been provided for in the 2022 budget to accommodate subsidy from January to June, the prevailing global economic realities were put into consideration which led to the proposed one year-long provision for the subsidy by the government.
Briefing State House Correspondents after the week’s virtual Federal Executive Council (FEC) meeting at the Presidential Villa, Abuja, the minister noted that the council approved a proposed amendment to the 2022 budget, alongside the year-long provision for subsidy directed the ministry to approach the National Assembly for an amendment.
According to her, we presented to council today a request for its 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’s assessment is that the country is consuming 65.7 million liters per day, now we’ll end up with 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 quantities of petroleum products consumed in the country and how the planned N3 trillion subsidy budget would be funded, the minister said that more works would be done on the proposal to reflect the current realities.
“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.