2021 budget didn’t cater for subsidy payment
BY VICTORIA ONU, ABUJA
Facts have emerged as to how the Federal Government through the Nigerian National Petroleum Company Ltd spent a whopping sum of N1.43trn subsidising the price of Premium Motor Spirit popularly known as petrol in 2021.
The amount was deducted by the NNPC from allocation to the three tiers of government between January 2021 and December of the same year.
Details of the payment were contained in the January Report submitted to members of the Federation Account Allocation Committee at its meeting held last Thursday.
“The corporation had been deducting from oil revenue to fund the subsidy of petrol to Nigerians as the 2021 Budget did not cater for subsidy payment
“
The Committee, headed by the Minister of Finance, Mrs. Zainab Ahmed, is made up of Commissioners of Finance from the 36 states, representatives of revenue generating agencies such as NNPC, Federal Inland Revenue Service, Department of Petroleum Resources, Central Bank of Nigeria, Nigeria Customs Service, among others.
According to analysis of the document by The Point, the corporation had been deducting from oil revenue to fund the subsidy of petrol to Nigerians as the 2021 budget did not cater for subsidy payment.
A copy of the NNPC report which was obtained by The Point showed that the NNPC incurred the sum of N25.37bn on subsidy in February. No amount was spent subsidising the product in the month of January.
The amount moved up to N60.39bn and N61.96bn in March and April, before hitting N126.29bn and N164.33bn in the months of May and June.
For the month of July, the Corporation incurred the sum of N103.28bn as subsidy on PMS, while the figure went up to N173.13bn, N149.28bn and N163bn in August, September and October respectively.
In November last year, the Corporation deducted the sum of N131.4bn from FAAC allocation while the highest amount of deduction of N270.08bn was made in the month of December.
The under-recovery arose as a result of the price differential between the landing cost and pump price of petrol.
With the deregulation of the downstream sector of the petroleum industry last year, the price of petrol had risen from N121.50 to N123.50 per litre in June, to N140.80-N143.80 in July, N148-N150 in August, N158-N162 in September and N163 per litre in November.
Since November 2020, the price of Premium Motor Spirit, popularly known as petrol, had remained unchanged despite the increase in crude oil prices in the international market.
As of the time the fuel subsidy was removed in June last year, the price of crude oil was about $45 per barrel.
But as of Friday, the price of Brent Crude had risen to about $80.52 per barrel. This price is far higher than the 2021 Federal Government budget benchmark price of $40 per barrel.
What this means is that while expectations are high that there would be more revenue to be earned from crude oil sales by the NNPC for the government, the adverse effect would manifest on the imported price of refined products.
Following the coming into law of the Petroleum Industry Act, the Federal Government had planned to end the fuel subsidy regime by the end of February 2022.
But the timeline was shifted to June this year, a development that was condemned by the Nigeria Labour Congress.
The NLC had threatened to embark on industrial action if the government went ahead to implement an increase in the price of Premium Motor Spirit.
The Congress had in a petition to the Governors of the 36 states called on the Federal Government to announce the withdrawal of its plans to increase the pump price of petrol.
Following the threat, the Federal Government suspended the implementation period for fuel subsidy removal to forestall supply disruptions and guide market readiness preparatory to migration to the deregulated pricing regime.
President Muhammadu Buhari following consultations with stakeholders, agreed to an extension of the statutory period for the implementation of the removal of subsidy on PMS in line with existing laws.
This is expected to gulp the sum of N3trn in the 2022 fiscal period based on the budget funding request made by the NNPC.
Speaking on the development, the President’s Special Adviser on Media and Publicity, Femi Adesina, said that the Federal Government will continue to borrow to raise the needed amount to finance the fuel subsidy regime.
He argued that with the huge amount needed to subsidise the price of Premium Motor Spirit, the country may be left with no other choice than to continue borrowing to shoulder its fiscal burden.
Adesina described the planned removal as ill-timed because of the hardship that it will cause to Nigerians.
He said, “It is done because as the minister (of finance) stated, the timing is not auspicious, inflation is still high. In the past eight months, we saw inflation reducing but last month, it went up again; further consultations need to happen with all the stakeholders.
“The timing is not right; it will exacerbate the hardship of the people and the President genuinely cares. Politics is a part of our lives, but elections will just be one event in the life of the country. When elections come, they go, the country continues. This fuel subsidy, whether it stays or goes, is going to have a serious impact on the economy.
“Head or tail, Nigeria will have to pay a price; it is either we pay the price for the removal in consonance and in conjunction with the understanding of the people.
“The other cost is that borrowings may continue and things may be difficult fiscally for both the state and the federal government. You know how much could have been saved if the subsidy was removed and how it could have been diverted to other spheres of our lives, we have to pay a price.”
