FG has been borrowing to fund petrol subsidy, says finance minister

• As FG ends petrol subsidy in June, allocates only N3.36bn

The Federal Government has been borrowing to fund petrol subsidies and this is totally unsustainable, Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, has said.

She said only N3.36 trillion had been allocated for subsidy in this year’s budget in preparation of the government’s termination of the subsidy regime in June.

She disclosed this on Wednesday at the public presentation of details of the 2023 budget in Abuja.

“Fuel subsidy cost was a very high one; We have been funding it from borrowing,” the minister said.

She added that petrol subsidy would “remain up to mid-2023 based on the 18-month extension announced early 2022. In this regard, only N3.36 trillion has been provided for the PMS subsidy.”

The FG had announced plans to end subsidy from July 2022 but changed its position when faced with threats of nationwide protests by labour and pushed it to July 2023.

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The minister also said the reconciliation between the ministry and the Nigerian National Petroleum Company Limited, NNPCL, was ongoing to determine crude oil revenues and what should accrue to the federation account.

On the controversial securitisation of the N22.7 trillion borrowing from the Central Bank of Nigeria by Ways & Means, she said her team would engage the National Assembly on the lingering disagreement between the two arms of government.

Debt securitization is the process of packaging debt(s) from a source or number of sources into a single security to be sold to investors.

The minister said the decision to securitise the debt was to reduce the burden on the Federal Government, as interest on the Ways & Means could hit N2 trillion this year, from N1.2 trillion, if nothing was done.

“If successfully securitized, rather than the current interest rate of MPR+3per cent (19.5%), interest on the Ways & Means, it would reduce to about nine per cent,” she said.

On the macro-economy, she said the economy had been fully diversified, with oil revenue projected to contribute only N2.29 trillion (22 per cent of revenue) to the budget in the current fiscal year.

She said, “In aggregate, 22% of projected revenues is expected from oil-related sources, while 78% is to be earned from non-oil sources. This shows that we have achieved a fully diversified economy in this country.”

Non-oil taxes are estimated at N2.43 trillion; Federal Government independent revenues are projected to be N2.62 trillion; while other revenues total N762 billion.

FG awaits stamp duty fund probe

The minister disclosed that the Federal Government was awaiting the outcome of investigations into claims that the CBN had large stamp duty funds in its account.

Ahmed said that investigations had been instituted into the matter but did not give details.

She said, “There is an investigation that is being carried out by a committee. There are also some investigations that are being carried out by some security agencies.

“We are anxiously waiting for the outcomes of these investigations. If funds are realized from these investigations, it will help us fund the deficit in the 2023 budget.”

The presidency had dismissed the allegations of misappropriation of the stamp duty funds levelled against the apex bank.

Budget deficit put at N 11.34tn

This year’s deficit has been estimated at N11. 34 trillion, representing 5. 03 per cent of the Gross Domestic Product (GDP).

Ahmed said that the deficit would be financed mainly by domestic borrowing of N7 04 trillion; foreign sources of N1.76 trillion; N1. 77 billion from multilateral and bilateral loan drawdowns; and privatization proceeds of N206.18 billion.

She said the deficit level had exceeded the three per cent of the GDP provided in the Fiscal Responsibility Act and it might be necessary for the law to be amended to accommodate the new realities.

She said there was no plan to restructure the nation’s debt, adding that the administration had consistently met debt obligations.

Rather, she said that the country would continue to spread debt maturities through debt refinancing.

The fiscal deficit for 2022 was estimated at N8.17 trillion, inclusive of the Supplementary budget. As at November 30, 2022, the deficit was N6.37 trillion, which the minister said was totally financed by borrowings, mostly from domestic sources.