It will cost N3trillion to fund petrol subsidy this year at N270 billion per month, the Federal Government said yesterday.
This is based on the projection submitted by the Nigerian National Petroleum Company (NNPC) Limited after the government announced a stay of action on petrol subsidy removal.
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said N443 billion was budgeted for subsidy from January to June.
This will have to be increased and sourced, she added.
The minister spoke with State House Correspondents after the week’s Federal Executive Council (FEC) meeting at the Presidential Villa, Abuja.
The Federal Government on Monday put subsidy removal on hold to allow for relief measures. It said it would provide for subsidy payment beyond June.
The decision has affected the implementation of the Petroleum Industry Act (PIA).
Mrs Ahmed said FEC approved a proposed amendment to the 2022 Budget to accommodate the additional subsidy funding.
According to her, council proposed a year-long provision for subsidy, taking into consideration the prevailing economic realities.
She said: “We presented to council a request for consideration to make additional funding provisions to enable us to meet incremental fuel subsidy request in the 2022 Budget.
“In the 2022 Budget, as appropriated, we made a provision of N443 billion for subsidy for January to June.
“Having taken into account the current realities, increased hardship on the population, heightened inflation, and that the measures that needed to be taken to enable a smoother exit from the fuel subsidy are not yet in place, it was agreed by Council that it is undesirable to exit fuel subsidy now.
“The NNPC has presented to the ministry a request for N3 trillion as fuel subsidy for 2022.
“What this means is that we have to make an incremental provision of N2.557 trillion to be able to meet the subsidy requirement, which is averaging about N270 billion per month.
“In 2021, the actual under-recovery that has been charged to the Federation was N1.2 trillion, which means an average of N100 billion.
“In 2022, because of the increased crude oil price per barrel in the global market, now at $80 per barrel, and also because NNPC assesses that the country is consuming 65.7 million litres per day, now we’ll end up with the incremental cost of N3 trillion in 2022.
“So, this has been considered by Council and we’ve also been asked to approach the National Assembly for an amendment to the fiscal framework as well as the Budget, to also further discuss with NNPC on how to make provisions for this and also how to rationalise this expenditure.”
The minister gave an insight into how the N3 trillion for subsidy will be sourced.
She said: “We’re going to engage NNPC to further interrogate the request that they presented to see how we can scale it down.
“We agreed with the view of governors, that there is a need to scale down on the size.
“Even as the government is not immediately removing the fuel subsidy, we have to make sure that what the nation is incurring is efficient, and that it is a real cost that has been consumed by the country.
“How do we fund it? We’ll have to reduce it from that N3 trillion.
“Secondly, we have several reconciliations with NNPC and NNPC itself is owing (the government) in some cases.
“We want to be able to settle some of the subsidy costs through this reconciliation process.
“When we’re done with that, whatever is left that we’re not able to apply to what an NNPC is owing the Federation will not be increasing the deficit.
“That means increased domestic borrowing. But we haven’t finished the reconciliation. This is just the second day.”