Nigeria has so far spent no less than N1.51 trillion on the importation of petrol in 2022. This is according to the National Bureau of Statistics (NBS).
This is 25.54 percent of the total imports for this quarter, and an increase of 17.05 percent compared to the N1.29tn spent on importing fuel in Q1 2021.The PMS import, as usual, tops the list of imported products for this quarter. This was disclosed in the Foreign Trade in Goods Statistics report of the NBS.
Figures from the Nigerian National Petroleum Company Limited (NNPC) showed that the oil firm spent N210.38bn, N219.78bn, and N245.77bn as subsidies on petrol in January, February, and March 2022, respectively.
This means that N675.93bn was spent on fuel subsidies in Q1 2022. The amount spent on fuel subsidies is 44.86 percent of the amount spent on fuel imports. The amount spent on fuel subsidy monthly rose from N60.39bn in March 2021 to N245.77bn in March 2022, indicating an increase of 306.97 percent.
Despite the increasing cost of the fuel subsidy, Nigerians still suffered a hike in the cost of transportation. Economic and energy experts have continued to decry the rising cost of fuel subsidies to the Federal Government. The World Bank and the International Monetary Fund (IMF) have decried the Federal Government’s huge spending on petrol subsidies, urging the government to end the regime.
The World Bank said increasing fuel subsidy puts the Nigerian economy at a high risk as subsidy payments could significantly impact public finance and pose debt sustainability concerns. Although the Federal Government had planned to stop paying fuel subsidies by June 2022, the government eventually backtracked on the plan.
However, in January this year, the Federal Government decided to retain the controversial fuel subsidy for another 18 months following threats of protests by the Nigerian Labour Congress (NLC) and other interest groups. The IMF said the fear of political resistance, widespread corruption, and pressure from interested groups hamper the removal of the fuel subsidy in Nigeria.
The IMF said this in its ‘Nigeria: Selected Issues Paper’ report, which was prepared by a staff team of the Fund as background documentation for its periodic consultation with Nigeria. The Federal Government has said it plans to tap the $2.2bn it raised in a Eurobond sale last year and targets more local borrowing in 2022 to help fund the subsidy.
The IMF has also said that Nigeria will likely depend on overdrafts from the Central Bank of Nigeria to fund its petrol subsidy bill, further negatively affecting its fiscal position. The IMF’s Resident Representative for Nigeria, Ari Aisen, recently said that Nigeria’s subsidy bill would likely hit N6tn by the end of this year at the current monthly subsidy bill of N500bn.
An economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, warned the subsidy adversely affected the economy. According to him, the approvals will lead to higher debt service, an increase in fiscal deficit, increasing inflationary pressure, and even naira depreciation.
He said, “With this development, our macroeconomic outlook in the near term should be a cause for worry. The outcomes of these approvals include increased borrowing, higher debt service, surge in fiscal deficit, heightening inflationary pressure and a risk of further depreciation in the naira exchange rate.”
He added that there would be an increase in recurrent expenditure as debt service and fuel subsidy will gulp a significant part of the government’s revenue. He also urged Nigerians to be prepared for more challenging times, as necessary economic recovery and growth reforms may not happen soon.
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