The Federal Government has revealed plan to spend N6.715 trillion between January and December 2022 on petrol subsidies with a daily estimate of N18.39 billion.
Zainab Ahmed, Minister of Finance, Budget and National Planning, made this revelation when she appeared before the House of Representatives Special Ad-hoc Committee investigating the petroleum products subsidy regime between 2013 and 2021.
Recall that the Nigerian Senate had earlier in the year, approved N4 trillion for petrol subsidy in 2022, following two separate requests by President Muhammadu Buhari to the National Assembly.
EnergyDay gathered that the over N6 trillion subsidy payment mark projected before the end of 2022, has put so much pressure on the need for the government to borrow to finance the petrol subsidy amidst other critical competing fiscal responsibilities.
According to the Finance Minister, Nigeria spends an estimated N18.39 billion daily on petrol subsidy payments.
She said, “For 2023, the projection is that the average daily truck-out will be N64.96 million per day; that is about 65 million per day, using an average rate at the open market rate of N448.20 and then a regulator pump price of N165 per litre. This gives us an average under-recovery, that is the difference between N165 and N448, of N283.2.”
“So, just multiply the amount of litre per day, the open market exchange rate of Naira to the dollar and then, the gap between the pump price and open market price, the total amount of subsidy per day is N18.397bn.
“So, if you are projecting for the full year, from January to December, it will be N6.715 trillion. If you are projecting for half a year, it will be 50 per cent of that, 3.375tn. I said earlier in the recommendations that we sent to parliament for consideration on MTEF in half-year, that will be N3.357 trillion.
“Fuel subsidy is the difference between the pump price which is now fixed at N165 (per litre) and the landing cost which we are projecting at an average of N448 per litre in 2023. Even now, the cost is around that.
“So, the PMS subsidy we are carrying today in the nation is around N283 per litre; that is what we are carrying. So, it is the difference between the pump price and the landing cost of petroleum products in the country.”
“This situation is not desirable and it is not sustainable. It is putting the country in a very serious, dire financial situation and we do hope that we will be able to exit this subsidy regime in the shortest possible time.
The minister also gave a breakdown of withdrawals from the Consolidated Revenue Fund and the Excess Crude Account for payments to oil marketers under the subsidy regime.
Ahmed partly said, “Deduction of PMS under recovery shortfall by NNPC for the period 2013 to 2022: We are reporting that there is a total sum of N4.436 trillion which was deducted as PMS under-recovery by NNPC for the period January 2013 to December 2021.
“In this report, we are reporting the sum of N1.774 trillion has been paid to independent oil marketers as subsidies from 2013 to 2016.
“I will like to call the attention of the committee to note that the total sum of N6.210tn – that is the N4.4tn plus the N1.774tn – was expended on PMS under-recovery by NNPC as well as payment of subsidy to independent oil marketers from 2013 to 2021.
“I want to report on the funding of subsidy payments to independent oil marketers for 2013 to 2016. Payments that have been made to them were directly from the domestic Excess Crude Account through the reduction of Sovereign Debts Instruments that we call the SDIs.
“The SDIs are negotiable short-term instruments that were issued by the government at that time to give marketers comfort and enable them access financial support from their bankers for the importation of PMS. The instrument was approved by the then President in 2010.”
, “It is also important to note that there were instances where funds were transferred from the Consolidated Revenue Fund to the domestic Excess Crude Account for subsidy payments.
“For 2015, there are two instances: N31bn from the FGN’s excess domestic account, transferred from the CRF. Again in 2015, N156.1bn was transferred from the CRF in another instance to the domestic Excess Crude Account,” Ahmed said.
Recall that Mr Ari Aisen, IMF’s Resident Representative for Nigeria, recently said that fuel subsidy payouts presently average N500 billion monthly and could hit a record N6 trillion mark by the end of 2022.
The Bretton Wood institution also warned that with fuel subsidy payments of about N500 billion monthly, total expenditure on subsidy could reach a record of N6 trillion by the end of 2022.