Amidst Nigeria’s increasing public debt profile, the Minister of Finance, Budget and National Planning, Zainab Ahmed, has once again decried the country’s fuel subsidy.
The Minister, describing the government’s borrowing to pay for fuel subsidy as ‘double jeopardy’, said the federal government is determined to end it this time. She said this on Tuesday during a press conference to mark the end of the 28th National Economic Summit in Abuja.
The federal government had earlier this year announced that it plans to end the subsidy by June 2023, which will run into the coming government.
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The debate around the removal of the subsidy has lingered for so long due to lack of political will by the President Muhammadu Buhari’s administration to do it.
The more it lingers, the more it consumes scarce resources, resulting in huge deficits in budget implementation and more public debt. The fuel subsidy gulped N2.565 trillion between January and August 2022. It also is expected to consume a large sum from the budget until mid-next year. According to the Medium-Term Expenditure Framework, the Federal Government proposed to spend N3.3 trillion on fuel subsidies between January and June 2023.
The federal government’s lack of political will to remove the petroleum subsidy is masterminded by factors headed by opposition from labor unions and civil rights groups. This is because the government doesn’t have a clear-cut plan on how to cushion the effect of economic hardship the subsidy removal will unleash on the masses.
Though she said the removal of fuel subsidy is part of the FG’s medium-term plan in the budget, Ahmed also acknowledged that how to go about it poses a big challenge.
“First, we have to engage. We have already engaged with the states and the public before it was approved as part of the medium-term plan.
“We have to do it by systematically informing the citizens about the size and the quantum of the fuel subsidy. We also have to educate them about the opportunity cost of what we are unable to do because of the fuel subsidy,” she said.
Nigeria’s total public debt profile stood at N42.8 trillion as of June 2022, according to the latest report from the Debt Management Office. This does not include the N22 trillion from the central bank’s Ways and Means lending to the federal government. The minister said the fuel subsidy, in addition to the budget deficit, is putting enormous pressure on the “fiscals”, forcing the federal government to borrow more.
“It is not money that we have; it is money that we have to borrow to maintain the fuel subsidy.
“Some countries introduced subsidy during the COVID-19, and because of the Russia-Ukraine conflict, but they are using their money to fund such subsidy.
“In our case, we are borrowing to pay the subsidy; that is double jeopardy. It is something that has to stop. We are glad that majority of people in decision-making positions, including the political parties, have agreed that subsidy is not sustainable.”