Fuel subsidy costs N3tr based on N8.28b daily, which may increase
By Jeph Ajobaju, Chief Copy Editor
Extension of fuel subsidy by 18 months will cost N3 trillion, says Finance Minister Zainab Ahmed. But that is based on the current daily cost of N8.28 billion which may increase if rising oil prices on the international market continues.
In any case, she adds, extending subsidy may necessitate additional domestic borrowing which Augusto & Co already predicted could reach N43tr this year.
Ahmed made the points on Wednesday in Abuja after a Federal Executive Council (FEC) meeting she said approved a request to amend the 2022 Appropriation Act and send it back to the National Assembly (NASS) for legislative approval.
The amendment will also contain a request for N52.8 billion for the completion of three roads across the country.
She said about N3 trillion will be required to pay for fuel subsidy but Abuja is also looking for ways to scale down the amount.
Ahmed reiterated that the Petroleum Industry Act (PIA) requires all petroleum products to be deregulated within six months of signing it into law.
“And the six months would have meant from August to February, but when we were doing the budget we stretched that to June,” she explained.
“But having to step back and take into account the realities of today, what it means is we have to go back and amend the PIA. So, the Ministry of Petroleum Resources will be leading on that.
“They had indicated that they will be asking for amendment to extend it to 18 months from six months. And then it means we can now also amend the budget. So the two processes will go side by side.”
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FEC agrees with Governors on reducing N3tr subsidy
Ahmed said the FEC agrees with Governors that there is need to scale down the N3 trillion subsidy but there is also need for cost efficiency.
“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 [Nigerian National Petroleum Company] to reduce the cost.
“But also we have several reconciliations with NNPC and NNPC itself owes in some cases, government. So, we want to be able to settle some of the subsidy costs through this reconciliation process.
“When we’re done with that, whatever is left that we’re not able to apply to what an NNPC is owing the Federation [Account] will not be increasing the deficit. And that means increased domestic borrowing.”