FEC Approves N3tn, 17.5% of 2022 Budget to Sustain Fuel Subsidy
The Federal Executive Council (FEC) on Wednesday approved the sum of N3 trillion for payment of fuel subsidy in 2022. The FEC approval came a day after the federal government also announced its plan to delay implementation of provisions of Petroleum Industry Act (PIA) on fuel subsidy and retain its payment for 18 months.
The N3 trillion now budgeted to sustain the payment of fuel subsidy amounts to 17.5 per cent of the N17.126 trillion 2022 budget signed into law on December 31, 2021. Already, the approved 2022 budget has a deficit of N6.39 trillion, which is 37 per cent of N17.126 trillion, providing an indication that the government may borrow more than it had earlier projected.
The N3 trillion approved by FEC is 55 per cent and 43 per cent of the capital component and recurrent expenditure of the 2022 budget, respectively.
The PIA stipulates the removal of petrol subsidy by February 2022 but the implementation of the provision was initially suspended to July 2022. However, due to pressure and threat of protest by the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC), the removal of fuel subsidy was further suspended on Monday.
On a related noted, the FEC yesterday mandated the Finance, Budget and National Planning Ministry to reconcile the fuel subsidy budget with the Nigerian National Petroleum Company (NNPC) Limited, which prepared the estimate.
The council meeting presided by President Muhammadu Buhari also okayed the preparation of the 2022 Supplementary Budget, which would include the repeal of Clauses 10 and 11 of the Appropriation Act as well as incorporation of N103 billion removed by the lawmakers from the initial budget estimates, for submission to the National Assembly for approval.
The decisions reached at the virtual FEC meeting were made public by the Minister of Finance, Budget and National Planning, Zainab Ahmed, who briefed newsmen after the meeting.
Ahmed said a memo in respect of the additional funding provisions to enable government meet the incremental fuel subsidy request in the 2022 budget was presented for the council’s consideration.
She said only N443 billion had been provided for in the 2022 budget to accommodate subsidy from January to June, but taking the prevailing economic realities, both locally and globally, into consideration, FEC proposed a year-long provision for the subsidy.
Ahmed said the request was considered by the council, which directed the ministry to approach the National Assembly for an amendment to the fiscal framework as well as the budget.
The minister explained, “You would recall that in the 2022 budget, as appropriated, we have made a provision of N443 billion for subsidy for January to June. Having taken into account the current realities: increased hardship in the population, heightened inflation, and also that the measures that needed to be taken to enable a smoother exit from fuel subsidy are not yet in place, it was agreed by Council that it is not yet desirable to exit fuel subsidy.
“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, but in 2022, because of the increased crude oil price per barrel in the global market, now at $80 per barrel, and also because NNPC’s assessment is that the country is consuming 65.7 million litres per day, now we will end up with an incremental cost of N3 trillion in 2022.
“So, this has been considered by Council and we have also been asked to approach the National Assembly for an amendment to the fiscal framework as well as the budget, and to also further discuss with NNPC on how to make provisions for this and how to rationalise this expenditure.”
The minister added that her ministry had been directed to engage the NNPC with the possibility of bringing down the subsidy estimate. She also stated that the government would fund the N3 trillion subsidy regime through outstanding debts owed it by NNPC, which were being sorted out through on-going financial reconciliations with the company.
