…New economic stabilisation paper hints at N5.4tn fuel subsidy
The Federal Government may have to spend about N5.4tn on fuel subsidies in a proposed economic stabilisation plan document.
This is contained in the Accelerated Stabilization and Advancement Plan report obtained by PUNCH Online on Wednesday.
The plan presented by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, to President Bola Tinubu, aims to fast-track economic recovery, assist as many Nigerians as possible, and further mitigate the impact of the ongoing economic reforms of this administration.
The plan to be implemented within one to six months will tackle inflation and further increase the purchasing power of the populace.
The report said the subsidy payment was part of difficult challenges threatening to unravel bold reforms by the president.
The report said, “Fuel subsidy: At current rates, expenditure on fuel subsidy is projected to reach N5.4 trillion by the end of 2024, This compares unfavourably with N3.6tn in 2023 and N2.0tn in 2022.”
ALSO READ: Breaking: Government Removes Fuel Subsidy, Give Reasons
The amount represents an average of N450bn monthly subsidy bill.
The document indicated the government had yet to reduce, “fuel subsidies to zero given the current inflationary and consequent social pressures.”
It also recommended developing a framework for market-driven pricing of petroleum products and a full fuel subsidy sunset to facilitate growth in the oil sector.
Government officials including the Minister of State for Petroleum Resources, Heineken Lokpobiri, have severally denied the reinstatement of subsidy.
At an event recently, the minister stated, “Let me say categorically that the president had rightly said, on the day he was sworn in, he said subsidy is gone. The last government did not make any provision for subsidy in the 2023 budget.
“And I can confirm to you that subsidy is gone. But there could be strategic interventions from time to time. But officially, the subsidy is gone. If you look at the Petroleum Industry Act, the NNPC, as a national oil company, also has a legal obligation to intervene from time to time.”
But the International Monetary Fund among other stakeholders said the silent reintroduction of fuel subsidy by the Tinubu administration was expected to gulp almost half of its projected oil revenue this year.
“To help Nigerians cope, authorities started capping fuel pump prices below cost, reintroducing implicit subsidies by end-2023, the IMF said.
Similarly, the report cited persistent high inflation, interest rates that make it difficult for businesses to borrow, and a volatile exchange rate as part of macroeconomic indices’ challenges.
The document added that the finance minister is expected to advise on the macro-fiscal position of the plan, and is to consider non-exclusive options, including a push for prioritisation of initiatives to reduce supplementary budget requirements, pursue supplementary budget as a partial funding source, pursue virement of the current budget, and sale of government assets (but this will have a time lag).
The report further added that constrained revenues have impeded the government’s ability to achieve financial projections in the 2024 budget.
“Our ability to achieve the 2024 Budgeted revenue step-up of 77.4 per cent from 2023 actual is at risk should oil production remain 27.0 per cent below budget. 50 per cent of the annualized Year To Date variance suggests a lower-than-budgeted revenue of N15.7trn at the current run rate.
“FG retained revenue for January and February 2024 was approximately 60.0 per cent of budget, largely driven by lower crude oil production volumes (running at 74.5 per cent of budget projection) If current revenue shortfalls persist the revenue for 2024 is unlikely to exceed N15.8tn,” the report submitted.
The plan is structured to advance Tinubu’s economy-related eight priority areas and is broken down into Agriculture and Food Security Sub-Committee plan, Energy Sub-Committee plan: Oil, Energy Sub-Committee plan: Gas, Energy Sub-Committee plan: Power, Health and Social Welfare Sub-Committee plan, and Business Support Sub-Committee plan.
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