2023 Budget: FG Projects N6.7trn For Petrol Subsidy Spending

• To fund N3.09trn deficit through borrowings

BY COBHAM NSA – Despite defending the current increase in the pump price of petrol as the way forward, the Federal Government says a whopping N6.7 trillion has been projected for subsidy payments on petrol in the 2023 budget.

Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed, said the projected fiscal outcomes in the medium term covering the subsidy payment are based on two prevailing scenarios based on the underlying budget parameters and assumptions.

Speaking at the presentation of the 2023-2035 Medium Term Expenditure Framework & Fiscal Strategy Paper (MTEF&FSP) Public Consultation in Abuja on Thursday, Mrs Ahmed said the first scenario, which is business-as-usual, estimates a petrol subsidy at N6.72 trillion for the full year 2023.

According to her, under this first scenario, the subsidy on PMS “will remain and be fully provided for by the new Nigerian National Petroleum Company Limited (NNPCL) on behalf of the federation”.

Explaining the second scenario, the Minister said this is where the “petrol subsidy will remain up to mid-2023 based on the 18-month extension announced early 2021, in which case only N3.36 trillion will be provided for”.

She however cautioned that “both scenarios have implications for net accretion to the Federation Account and projected deficit levels”, adding; “There will be tighter enforcement of the performance management framework for Government Owned Enterprises (GOEs) that will significantly increase operating surplus and dividend remittances in 2023”.

Further putting things in perspective, the Minister admitted the Nigerian economy has faced significant challenges this is the first half of the year, given the challenged and disrupted macro-economic environment, even as she said; “Overall, fiscal risks are somewhat elevated, following weaker-than-expected domestic economic performance and structural issues in the domestic economy.”

She said this is as crude oil prices have plummeted with the government having to adjust the budget and its Medium-term plan, adding; “And also, another development that has affected is the massive cut that OPEC has now imposed on OPEC members and OPEC allies to our production volume. So, our crude oil production level as provided by OPEC is now 1.4 million barrels per day.’’

She said the government might have a total budgetary estimate of about N17 trillion for 2023 in one of the scenarios and about N16 trillion in the other, stressing that “the draft 2023-2025 MTEF/FSP has been prepared against the backdrop of continuing global challenges occasioned by lingering Covid-19 pandemic effects, as well as higher food and fuel prices due to the war in Ukraine.”

The Minister, who disclosed that the differential of N3.09 trillion deficit gap between actual expenditure and revenue will be financed through borrowing, said the government will however not relent in taking measures aimed at cushioning the hardship faced by Nigerians.

On the subsidy funding, Mrs Ahmed said the government intends to engage the NNPCL on the modalities that to apply in handling the issue at hand, explaining further that the “new arrangement has indicated that NNPC will not be contributing monthly to the Federation as they used to in the past.

“But NNPC will be paying royalties, dividends, and taxes. So while the revenue might not be monthly, we will work on an arrangement on how this will be paid.”

However, she said contrary to public perception, the NNPCL is not privatized but only rehoned by the government to establish a world-class business module that will enable the new company to emerge as a game changer in the nation’s oil sector.

Unveiled by President Muhammadu Buhari last Tuesday at the Aso Rock Villa, the NNPCL has the slogan, ‘Energy for Today: Energy for Tomorrow.’