THE Federal Government has earmarked the sum of N6.72 trillion for payment of fuel subsidy in the 2023 budget, Minister of Finance, Budget and National Planning Zainab Shamsuna Ahmed has said.
The minister said this at the Public Consultation of the Draft 2023–2025 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTFF/FSP) TODAY in Abuja.
Ahmed explained that the government took the decision based on two scenarios.
She said the deficit underscored the fiscal challenges confronting the federal government.
The minister also announced that the Nigerian National Petroleum Company Ltd (NNPCL), which had funded the fuel subsidy until last month, would henceforth leave that responsibility to the federation.
This, she said, would even create a greater strain on the fiscal position of the federal government, describing fuel subsidy as unsustainable.
Speaking on the subsidy, the minister painted two scenarios, stating that the government had projected fiscal outcomes in the medium term under two scenarios based on the underlying budget parameters/assumptions.
Under the first scenario, the minister said: “The subsidy on PMS is estimated at N6.72 trillion for the full year 2023. It will remain and be fully provided for by the NNPC on behalf of the federation.”
On the second scenario, she said: “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.
“Both scenarios have implications for net accretion to the Federation Account and projected deficit levels.
“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.”
Ahmed further said except the subsidy is removed, government expenditure would be funded by more borrowing, going forward.
“And that’s why it’s important for us to consider this issue of removal of subsidies very seriously,” she said.
The minister disclosed that as at April 30, 2022, N1.23 trillion was realised out of the pro rata projection of N3.12 trillion, representing a mere 39% performance.
Despite higher oil prices, oil revenue underperformed due to significant oil production shortfalls occasioned by oil production shut-ins resulting from pipeline vandalism and crude oil theft; and high petrol subsidy cost due to higher landing costs of imported products.
