The Federal Government of Nigeria may need to allocate approximately N5.4 trillion for fuel subsidies as part of a proposed economic stabilization plan, according to the Accelerated Stabilisation and Advancement Plan report. This report, presented by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, to President Bola Tinubu, outlines strategies aimed at expediting economic recovery, assisting a broad segment of the population, and mitigating the effects of ongoing economic reforms.
The proposed plan is designed for implementation over a period of one to six months, with key objectives to address inflation and enhance the purchasing power of Nigerians. However, the report emphasizes that the substantial expenditure on fuel subsidies presents a significant challenge to the administration’s ambitious reform agenda.
“Fuel subsidy: At current rates, expenditure on fuel subsidy is projected to reach N5.4 trillion by the end of 2024,” the report states. This projection marks a steep increase from N3.6 trillion in 2023 and N2.0 trillion in 2022, equating to an average monthly subsidy bill of N450 billion.
The document underscores that the government has not yet eliminated the fuel subsidy, citing prevailing inflationary pressures and associated social challenges. It advocates for developing a framework for market-driven pricing of petroleum products and setting a definitive end date for fuel subsidies to stimulate growth in the oil sector.
Despite these projections and recommendations, government officials, including the Minister of State for Petroleum Resources, Heineken Lokpobiri, have repeatedly denied the reinstatement of fuel subsidies.
“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,” the minister stated.
However, the International Monetary Fund (IMF) and other stakeholders noted that the silent reintroduction of fuel subsidies by the Tinubu administration is expected to consume nearly half of the 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.
The report also highlighted other macroeconomic challenges, including persistently high inflation, high interest rates that make borrowing difficult for businesses, and a volatile exchange rate.
The finance minister is expected to advise on the plan’s macro-fiscal position and consider options such as prioritizing initiatives to reduce supplementary budget requirements, pursuing supplementary budgets as partial funding sources, reassigning current budget allocations, and selling government assets.
Limited revenues have hampered the government’s ability to meet financial projections for the 2024 budget. “Our ability to achieve the 2024 Budgeted revenue step-up of 77.4 percent from 2023 actual is at risk should oil production remain 27.0 percent below budget. Fifty percent of the annualized year-to-date variance suggests a lower-than-budgeted revenue of N15.7 trillion at the current run rate,” the report stated.
The document concluded that the Federal Government’s retained revenue for January and February 2024 was approximately 60 percent of the budget, largely driven by lower crude oil production volumes, which are currently running at 74.5 percent of the budget projection. If current revenue shortfalls persist, the revenue for 2024 is unlikely to exceed N15.8 trillion.
Credit: Nigerian Tribune
