The Minister of Finance, Budget and National Planning, Zainab Ahmed, has disclosed that the Federal Government will stop paying subsidies on Premium Motor Spirit (petrol) by June 2023.
According to The Punch, Ahmed made this disclosure during a meeting with the House of Representatives Ad Hoc Committee investigating the Petroleum Products Subsidy Regime from 2013 to 2022, on Thursday.
The minister further explained that the Federal has decided to end payments on under-recovery between the landing cost and regulated pump price of PMS, stating that the subsidy regime was not sustainable and might force the government to borrow more in 2023.
She disclosed that the plan to stop the payment of petrol subsidy is contained in the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper.
According to her, President of the Senate, Ahmad Lawan, and Speaker of the House of Representatives, Femi Gbajabiamila, had received the MTEF/FSP from the President, Major General Muhammadu Buhari (retd.) approved by the National Economic Council and the Federal Executive Council, respectively.
She stated, “One thing that stands out in the Medium Term Expenditure Framework was that if the nation holds on to fuel subsidy as it is designed now, we will be incurring from January to December, a subsidy cost of N6.4tn. But we suggested to the Federal Executive Council, and the council approved that, maybe, we could look at the option of exiting the subsidy (regime) half year. So, if we did that, then the cost would be N3.35tn, which is half of the N6.7tn.
“The Federal Executive Council approved the second option. That is the option that was conveyed by His Excellency, the President, to the National Assembly. But Let me also say that even though this is a reduced option, it would mean that we are borrowing more than we would have borrowed if we did not have fuel subsidies. In 2022 we are carrying the cost of subsidy throughout the whole year.
“Recall that the initial MTEF and approval by the parliament was for us to exit the subsidy by June of this year. But during the course of the year, making assessment of the difficult fiscal challenges in the economy and the hardship that our citizens are bearing due to high inflation and other challenges, we were asked to re-submit our plans and review them to include provision for fuel subsidy throughout the year 2022. That was how we came back to parliament with an incremental expense from N443bn which we had planned to up to N4tn subsidy expense in 2022.”
Ahmed further stated, “This situation is not desirable and it is not sustainable. It is putting the country in a very serious, dire financial situation and we do hope that we will be able to exit this subsidy regime in the shortest possible time.
“The N3.35tn in the approved MTEF that is now before the National Assembly for consideration could have been funds that would apply to other vital sectors of the economy such as health, education and social protection. So, we are carrying a burden and we must sit back as citizens and really assess whether it is beneficial for us to continue to do so.”