A day after the federal government announced its plan to delay implementation of the Petroleum Industry Act (PIA) and retain payment of petrol subsidy for 18 months, the government yesterday approved N3 trillion for the new subsidy regime. The Federal Executive Council (FEC) approved the sum at its weekly meeting in Abuja.
The N3 trillion now budgeted to sustain the payment of subsidy in 2022 alone, amounts to 17.5 per cent of the total of N17.126 trillion 2022 budget that was signed into law on the last day of 2021. Already, the approved 2022 budget has a deficit of N6.39 trillion, which is 37 per cent of the N17.126 trillion. This is a clear indication that the government may borrow more this year 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.
Implementation of the PIA, which stipulates the removal of petrol subsidy, was initially meant to commence in February 2022, but it was later shifted 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 subsidy was suspended on Monday.
But NLC, Lagos chapter, yesterday criticised the federal government’s decision to recommend an 18-month extension of the PIA to the National Assembly.
On its part, the Independent Petroleum Marketers Association of Nigeria (IPMAN) urged the federal government to introduce palliatives to cushion the effect of subsidy withdrawal, irrespective of the postponement of the policy, as well as fix all the country’s refineries.
Meanwhile, Chairman of the Nigeria Governors Forum (NGF) and governor of Ekiti State, Dr. Kayode Fayemi, said only about eight states were presently benefitting directly from petrol subsidy. Fayemi said this at a joint meeting between the state governors, NLC, and TUC over the fuel subsidy withdrawal.
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 the fuel subsidy are not yet in place, it was agreed by Council that it is 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 an NNPC’s assessment is that the country is consuming 65.7 million litres per day, now we’ll end up with 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 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 stated, “We’re going to engage NNPC to further interrogate the request that they presented with a view of trying to see how we can scale it down so that the country is not incurring N3 trillion for a fuel subsidy.
“We agreed with the view of governors, that there is a need to scale down on the size. So even as 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 real cost that has been consumed by the country.”
Ahmed 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.
According to her, “We have several reconciliations with NNPC, which is owing, in some cases, the government. So we want to be able to settle some of the subsidy costs through this reconciliation process.
“When we are done with that, whatever is left that we are not able to apply to what NNPC is owing the federation will not be increasing the deficit. And that means increased domestic borrowing. But we haven’t finished with the issue of reconciliation.”
Ahmed further disclosed that FEC approved the 2022 Supplementary Budget to take care of areas that were overlooked by the National Assembly in approving the Appropriation Bill. She said FEC approved amendments to parts of the 2022 budget, which had initially been adjusted by the National Assembly during its legislative deliberations on the budget proposal submitted to it by the president in 2021.
According to her, the approved amendment to be transmitted to the National Assembly will request to repeal clauses 10 and 11 concerning the Economic and Financial Crimes Commission (EFCC) and the Nigerian Financial Intelligence Unit (NFIU) operations in the 2022 budget and restore the N103 billion the lawmakers had removed.
She said, “The second memo we presented to Council today has to do with a request for approval of the 2022 Appropriation Amendment. If you recall, when the president signed the 2022 appropriation into law on the 31st of December, he raised some concerns that he had in some of the provisions in the budget and had indicated that he will be submitting an amendment proposal to the National Assembly for them to effect improvements in what has been done to the budget.
“So, today Council took that amendment proposal and I just want to report that part of the requests that Council has approved today is for the National Assembly to repeal clauses 10 and 11. Clause 10 is referring to a provision that has been made that will enable the EFCC and NFIU be able to take 10 per cent of whatever collections that they recover.
“We’re asking for that to be repealed because this is in direct contrast to the Acts of these two agencies and also it is in contravention of the Fiscal Responsibility Act and the Finance Act 2021.
“Clause 11, on the other hand, is a provision that has been made that says that the Nigeria embassies and missions are now authorised by this Appropriation Act to expend funds allocated to them under Capital Components without the need to seek approval of the Federal Ministry of Foreign Affairs. This, again, Council agreed, is inconsistent with financial regulations and also inconsistent with the provisions of the Public Procurement Act. So, we are asking for this to be repealed.
“Council also approved that some of the changes that were made in the Appropriation Act, totalling N103 billion, should be restored and examples of these are N22 billion that was provided for sinking fund to mature bonds that will be ready for payment in 2022 in the Nigerian domestic market, and also N12 billion for counterpart funding that is required for the various rail projects, and N189 million to be adjusted also in the budgets of the Ministry of Transport, Secretary to the Government of the Federation, and the Head of Service.
“These are projects that are provided in these ministries that are completely unrelated to their mandate, so implementation will be a problem. Also, N5 billion to be restored for non-regular allowances of the Nigerian Navy, N15 billion to be restored for the regular allowances of the police formations and police commands and several others that Council looked at in detail.
“So, there’s a detailed schedule of this N103 billion that Mr. President will be formally conveying to the National Assembly to restore the adjustments that were made.”
Ahmed also disclosed that FEC ratified an instrument on diplomatic relations between Nigeria and South Africa.
She said, “This has to do with the confirmation of ratification of Customs Mutual Administrative Assistance Agreement between South Africa and Nigeria and the purpose for us is for the customs law in the respective territories to be properly observed to prevent and also enhance investigation and to combat customs offenses and to afford each country mutual assistance in cases concerning the delivery of documents regarding the application of customs laws in two countries.
“The importance of this for us is cooperation between Nigeria and South Africa, as it has become even more important now with the Africa Continental Free Trade Agreement. It will also help to increase trade relations between the two countries and facilitate exchange of information as well as strengthen our bi-national cooperation.”