World Bank seeks petrol subsidy removal as Nigeria plans N900bn for 2022

*Nigeria may spend N900billion on fuel subsidy in 2022, if the Federal Government continues to subsidise Premium Motor Spirit (PMS) otherwise known as petrol ─Zainab Ahmed, Minister for Finance, Budget and National Planning

*World Bank’s Shubham Chaudhuri, Country Director for Nigeria, says the majority of the poor do not benefit as much from the subsidy regime in the country

Gbenga Kayode | ConsumerConnect

As the Ministry of Finance, Budget and National Planning endeavours to explain the new policy in the Nigerian economy, the Federal Government says that it is projecting  to spend N900 billion subsidising petrol next year.

ConsumerConnect reports the government has announced a subsidy proposal as it plans to spend about N13.91 trillion as budget for the 2022 fiscal year.

Mrs. Zainab Ahmed, Honourable Minister for Finance, Budget and National Planning, revealed this Thursday, July 1 at the 2022-2024 Medium Term Expenditure Framework /Fiscal Strategy Paper (MTEF/FSP) public presentation.

The Minister said that the projected budget will have a deficit of 3.05 percent.

Mrs. Ahmed stated: “The total budget size will be 11.907trillion but when you add the government owned enterprises, it moves to N13.91trillion.

“This is compared to the N13.58trillion for 2021. Then in 2023 the budget size moves to N15.45tr and N16.77tr in 2024. For 2022 we will have a fiscal deficit that is 3.05%. This is just 0.5% higher than what is in the Fiscal Responsibility Act.

“It is also an improvement on the 3.93% that is in the 2021 appropriation.”

According to her, “the financing items for the budget will include proceeds for the privatisation, drawing multilateral/bilateral loans and new borrowings from both domestic and local markets to fund the deficit of N5.622tr in the 2022 budget and a similar amount in the 2023 budget. Borrowing will be 50% local and 50% international.”

The Minister disclosed that Nigeria may spend N900billion on fuel subsidy in 2022, if the Federal Government continues to subsidise Premium Motor Spirit (PMS) otherwise known as petrol.

Ahmed said: “We must get rid of the subsidy because Nigeria is subsidising petrol for the whole region. The price of the product is $500 in some Africans countries. There are few people that can afford cars in Nigeria while some have two.

“The poor people that should benefit from government interventions, at most, use public transport to get to their destination. So, the subsidy does not affect them in any way.”

However, she stressed that the government is considering the introduction of an initiative to provide succour for consumers that would be affected with the subsequent removal of the subsidy in the Nigerian economy.

She noted: “The transition is not an easy one if we have to remove the subsidy. What are the alternatives? What can we provide for citizens?

“So we are projecting if we’ll be paying at least N900 billion in subsidy for next year. Imagine what we could have done with that amount.

“How many schools can you build? How many healthcare centres? It is not wise; it is not wise because we are hurting our economy.”

World Bank wants ‘N1.8trn annual petrol subsidy’ scrapped

In a related development, as the Federal Government has projected N900billion as petrol subsidy for the next year, the World Bank has said based on its estimates, at least N150 billion is spent monthly on petroleum subsidies, and about N1.8 trillion annually in Nigeria.

Mr.  Shubham Chaudhuri, Country Director for Nigeria

The global lender said this could be channelled into financing primary healthcare, education, security, and other developmental issues in the country’s economy.

Mr.  Shubham Chaudhuri, Country Director for Nigeria, Africa Region, stated this when he visited the management of Media Trust Limited, publishers of Daily Trust, other titles and Trust TV Thursday, July 1, in Abuja, FCT.

The World Bank chief urged Nigeria to remove subsidies from petroleum and electricity. Chaudhuri said applying this measure would free up funds to be invested in other critical areas of the economy while subsidy removal on electricity will attract investors, Daily Trust report said.

According to him, the N150billion deducted by the NNPC as subsidy should have gone into the federation account as revenue for developmental projects.

The subsidy regime only subsidises the rich, and the economy of neighbouring countries like Niger Republic, he disclosed.

He also noted that the price of fuel in Nigeria is cheaper than its neighbours’, hence those who take the product across the borders benefit the most.

Chaudhuri stated: “The majority of the poor don’t benefit as much from the subsidy,” compared to those who have ‘many cars’ or who take fuel across the neighbouring states.

He, however, commended the Central Bank of Nigeria (CBN) for collapsing the dual exchange rate (Forex).

That action has ended arbitrage in the foreign exchange market, said he.

Chaudhuri also clarified that World Bank’s role is advisory, and they do not impose their opinions on the Nigerian authorities.

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