The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed had expressed worry over the continuous retention of the controversial fule subsidy regime by the federal government, adding that it is affecting Nigeria’s ability to service its debt.
She made the remarks at the hybrid launch of the World Bank’s Nigeria Development Update titled: “The Urgency for Business Unusual,’ held in Abuja, according to This Day.
The Finance Minister called on Nigerians to understand that fuel subsidy was causing a massive fiscal burden, saying a situation whereby the federal government borrows for consumption was wasteful.
Ahmed said, “This premium motor spirit (PMS) subsidy is costing us an additional N4 trillion than was originally planned. So, this is an unplanned deficit. We have gone to the National Assembly; we have gotten approvals, but the approval was simply for us to cut down on some of the investment costs. “So, investments that we needed to make in oil and gas sector which we are delaying and deferring to a later time and reducing the rollout of those investments. But we also had asked that we needed to borrow more which is very serious.
“Already we have borrowing increasing significantly and we are struggling with being able to service debt because even though revenue is increasing, the expenditure has been increasing at a much higher rate so it is a very difficult situation.”
She further said, “So Nigerians need to understand that this PMS subsidy we are carrying now is hurting the nation, its impeding the government’s ability to be able to invest in human capital development. N4.5 trillion is money that we could have invested in health or education.
“But where we are investing it in consumption, which is very wasteful, because how many Nigerians own cars that are benefiting from this subsidy.”
Also pointing out that Nigeria was facing challenges from not gaining from the current oil price rally, she opined, “We are in some kind of crossroads. It is not hearsay to say that Nigeria has not derived what it should from the current high crude oil prices, rather rising crude oil prices are posing significant fiscal challenges to our economy and may lead to some negative receipts and indeed we have started seeing already those negative receipts.
“There are three factors preventing Nigeria from fully benefiting from the current boom in the international crisis. First of all, our prediction had fallen below Nigeria’s estimated capacity and the OPEC quota because of insecurity vandalism and theft. Secondly, the domestic price of payments has remained fixed, while global PMS prices have continued to rise.
“The third is that rising international crude prices also increases the burden of PMS because we buy refined petroleum products. The higher crude oil price goes in the global market, the more we’re paying for PMS, and by maintaining this PMS subsidy we as a country, unfortunately, forego investments that will have used the monies into essential infrastructure, goods or services that would have increased the overall productivity of the nation. So this is really the bane of the major issue that we’re facing now.”
Meanwhile, the World Bank has projected that Nigeria may post a N5 trillion loss in oil revenues in 2022 as oil prices continue to rally and the war between Russia and Ukraine rages. This is N2 trillion above the multilateral institution’s earlier prediction.
The Washington-based institution also declared that although Nigeria’s growth prospects had improved, inflationary and fiscal pressure increased considerably, leaving the economy much more vulnerable.
