When the Nigerian National Petroleum Company limited (NNPC) makes its projected N328 billion petrol subsidy deduction from the Federation Account for March this week, Nigeria will have spent N758.1 billion in the first three months of 2022.
Described as unsustainable by many economic experts, the country’s subsidy regime burden borne by the three tiers of government, the federal, state, and local governments, has posed a huge leak on the country’s revenues.
In January, the NNPC withheld N210.382 billion, while in February, it deducted N219.783 billion and is expected to remove N328.004 billion again, to hit over N758 billion in the first quarter of 2022.
Nigeria’s largely opaque long-running petrol subsidy will see the country spend close to a quarter of N4 trillion of its entire budget of roughly N17 trillion this year on the major subsidy cost center.
A THISDAY analysis of the latest Federation Account Allocation Committee (FAAC) shows that the NNPC has been unable to contribute a Kobo into the joint account operated by the tiers of government for the whole of this year.
BizWatch Nigeria recalls that the Minister of Finance, Zainab Ahmed, in an announcement last month, said the federal government would draw $2.2 billion from the Eurobond it issued last September and add to the proceeds of fresh domestic borrowing this year to fund fuel subsidy.
In January, the government reneged on a previous decision to halt the subsidy regime, opting to prolong it by 18 months in what was seen as a move to forestall a potential civil resistance in the prelude to the 2023 presidential election.
For the umpteenth time last week, the World Bank Group urged Nigeria to rethink its fuel subsidy regime, with its boss, David Malpass, saying that resources being expended on the subsidy could be channeled to other sectors of the economy to accelerate growth.
“One is that they (subsidies) are expensive because they go to everyone, and they are often used by people with upper incomes than by people with lower incomes, so they are not targeted.
“So, we encourage that when there is need for subsidy, either food or for fuel, that it should be carefully targeted at those most in need of it. And so, we have encouraged Nigeria to rethink its subsidy effort,” he said.
Although the Minister of State for Petroleum Resources, Timipre Sylva, recently described the controversial subsidy regime as “a criminal enterprise,” Nigeria has continued to service it even though it doesn’t know the volume of petrol the country consumes.
In her comments, immediate past President of the Nigerian Gas Association (NGA), Audrey Ezigbo, insisted that the subsidy be removed as over N10 trillion had been spent between 2006 and 2021. According to her, that’s more than what the 36 states generated last year.
Also, an Energy Expert, Ronke Onadeko, described it as a scam, saying that Nigeria cannot even generate enough funds to cover the subsidy it pays. She submitted that contribution should only be retained for the 3 percent of Nigerians whom data show need the assistance.
But another oil and gas analyst, Zaka Bala, argued that subsidy is necessary to relieve the current economic crisis’s huge burden on Nigerians, saying that Nigeria would be making its biggest mistake by removing the backing.
He noted that the subsidy on diesel, kerosene, jet fuel, and gas, which have all been removed, has not helped the country in any way, adding that it is almost crashing the economy as banks now close before the time due high diesel prices.
In 2021, the country spent N1.43 trillion on what it terms under-recovery, which has almost tripled with the N4 trillion approved for the purpose in 2022 by the National Assembly recently.
