N4tn petrol subsidy’ll kill economy, MAN, LCCI, others warn Buhari

N4tn petrol subsidy’ll kill economy, MAN, LCCI, others warn Buhari

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The National Assembly on Thursday passed amendments to the 2022 Appropriation Act and 2022 Fiscal Framework, which raised the deficit in the Federal Government’s budget by N965.42bn, to N7.35tn; and subsidy on Premium Motor Spirit (petrol) by N442.72bn, from N3.557tn to N4tn.

The Senate and the House of Representatives considered and adopted reports on the amendment bills based on the request by the President, Major General Muhammadu Buhari (retd.).

The federal parliament approved a new oil price benchmark of $73 per barrel, a new oil production volume of 1.600 million per day, and a PMS subsidy of N4tn.

However, in swift reactions, economists and the Manufacturers Association of Nigeria warned the President that the N4tn subsidy would worsen the economic situation of the country and adversely affect individuals and companies.

But the organised labour commended the Federal Government.

They spoke in separate interviews with The PUNCH on Thursday.

Meanwhile, also passed by the National Assembly was an additional provision of N182.45bn to cater for the needs of the Nigeria Police Force as well as provision of N76.13bn for domestic debt service, with net reductions in statutory transfers by N66.07bn.

The statutory transfers’ adjustments are: the NDDC by N13.46bn, from N102.78bn to N89.32bn; NEDC by N6.30bn, from N48.08bn to N41.78bn; UBEC by N23.16bn, from N112.29bn to N89.13bn; Basic Health Care Fund by N11.58bn, from N56.14bn to N44.56bn; and NASENI by N11.58bn, from N56.14bn to N44.56bn.

The Chairman of the House Committee on Appropriations, Aliyu Betara, while addressing journalists after the passage,  said, “The President brought an amendment to the 2022 Appropriation Act, which the House passed today. We passed the budget with an increment to police salaries. We increased the police budget by N182bn. That is the only difference between the Appropriation Act and the amendment bill. It’s just the police increment. The budget now is N17.319,704,091.19.”

Betara, who was accompanied by the Deputy Chairman, Iduma Igariwey, also disclosed that the lawmakers made some adjustments to projects in the budget based on the request by the President.

The President had written two letters to the National Assembly to call for amendments to the budget and the fiscal framework for 2022.

In the first letter transmitted in February, Buhari had presented the 2022 Appropriation Act (Amendment) Bill to the National Assembly, seeking the approval of the federal parliament for a supplementary budget with estimates totalling N150,032,091,096.

The President also sought approval for another N2.557tn to extend the regime’s subsidy payment on petrol.

In the second letter, Buhari said the adjustments to the 2022 Fiscal Framework included an increase in the project oil price benchmark by $11 per barrel, from $62 per barrel to $73 per barrel; a reduction in the projected oil production volume by 283,000 barrels per day, from 1.883 million barrels per day to 1.600 million barrels per day; an increase in the estimated provision for PMS subsidy for 2022 by N442.72bn, from N3.557tn to N4tn.

Other adjustments include a cut in the provision for federally-funded upstream projects being implemented by N200bn from N352.80bn to N152.80bn; an increase in the projection for Federal Government independent revenue by N400bn; and an additional provision of N182.45bn to cater for the needs of the Nigeria Police Force.

Buhari listed statutory transfers’ adjustments as follows: NDDC by N13.46bn, from N102.78bn to N89.32bn; NEDC by N6.30bn, from N48.08bn to N41.78bn; UBEC by N23.16bn, from N112.29bn to N89.13bn; Basic Health Care Fund by N11.58bn, from N56.14bn to N44.56bn; and NASENI by N11.58bn, from N56.14bn to N44.56bn.

He said, “Total budget deficit is projected to increase by N965.42bn to N7.35tn, representing 3.99 per cent of GDP. The incremental deficit will be financed by new borrowings from the domestic market.”

Senators lament oil theft, dwindling revenue, budget deficit

The Senate, just as the House, passed the amendments as requested by the President.

The Chairman of the Senate Committee on Finance, Senator Olamilekan Adeola, in his presentation at the Committee of Supply, said the additional deficit of N965.42bn, which raised the total in the 2022 budget to N7.35tn, represented 3.99 per cent of Gross Domestic Products.

Adeola also stated that “the incremental deficit will be financed by new borrowings from the domestic market.”

However, lawmakers took turns to blame the country’s economic downturn on crude oil theft.

In his remarks, Senator Olubunmi Adetunmbi stated the Federal Government, especially security agencies, owed it as a duty to stop the stealing of the nation’s commonwealth.

Adetunmbi decried that at a time when most countries were reaping from the increase in global oil prices due to the Russian-Ukrainian crisis, Nigeria had been left out owing to its inability to meet its OPEC quota.

The Majority Leader, Yahaya Abdullahi, while corroborating Adetunmbi, said Nigeria should be worried over what was currently happening to it.

Abdullahi blamed the decline in the economy on the failure of security agencies to protect oil assets. He decried the increasing cases of oil theft despite the huge resources allocated to the military and paramilitary agencies.

Senators Gabriel Suswam and Betty Apiafi urged the Senate not to hastily approve the President’s request until certain questions had been answered.

While rounding off the debates, Lawan called on the Federal Government to take “radical” steps towards stopping the theft of crude oil by economic saboteurs.

The Senate President also called for a stop to the importation of refined petroleum products into the country, so as to cut down on expenditures incurred in the process, as well as to maximize profits from crude oil sales.

Lawan constituted a 13-member ad hoc committee to investigate oil theft in Nigeria and its impact on petroleum production and oil revenues.

The committee has Senator Bassey Akpan as Chairman and Senators Yusuf Yusuf, Solomon Adeola, Kabiru Gaya, Adamu Aliero, George Sekibo and Gabriel Suswam, Kashim Shettima, Aliyu Sabi-Abdullahi, Ali Ndume, Stella Oduah, Sani Musa and Ibrahim Gobir as members.  The committee is to report back within one month.

Meanwhile, the House has passed repealed the Customs and Excise Management Act 1958 which deals with new  taxes on carbonated drinks, telecom

N4tn petrol subsidy’ll kill economy, Buhari warned

The President of MAN, Mansur Ahmed, said petrol subsidy was a yoke on the Nigerian economy, arguing that placing much importance on petrol over issues of health and infrastructure was misdirected.

“We believe that subsidy is a yoke on our economy. First of all, the social sector is critical.  Maybe people feel that fuel is so important, but if you compare it with health, education and security, you will notice it is nowhere near them.”

He explained that perhaps, there were people benefitting from the subsidy, which makes it difficult to end.

“There are inefficiencies and leakages, but that is because of subsidy. Government should invest that money in infrastructure, health and education. The money will make bigger impact on the economy when invested in those critical areas, but what impact will subsidy make on the economy and what impact has it made so far?” he asked.

An economist and Chief Executive Officer of Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, warned that the new approvals by the legislature would adversely affect the economy.

According to him, the approvals will lead to higher debt service, increase in fiscal deficit, increasing inflationary pressure and even naira depreciation.

He said, “With this development, our macroeconomic outlook in the near term should be a cause for worry. The outcomes of these approvals include increased borrowing, higher debt service, surge in fiscal deficit, heightening inflationary pressure and a risk of further depreciation in the naira exchange rate.”

He added that there would be increase in recurrent expenditure as debt service and fuel subsidy will gulp a significant part of government’s revenue.

He also urged Nigerians to be prepared for more challenging times, as necessary reforms for economic recovery and growth may not happen soon.

Muda said, “Infrastructure budget implementation may be negatively impacted as recurrent expenditure increases sharply. The combination of debt service and fuel subsidy is likely to consume the entire revenue.

“The implications are that we should brace up for more challenging times. There is no quick fix. Major reforms necessary to return the economy to a recovery and growth path are unlikely to happen in the near term. This is coupled with the distractions that come with electioneering and transition periods.”

A former President, Association of National Accountants of Nigeria, Dr. Sam Nzekwe, stated that the government was increasing its projected subsidy spending when it could not tell the actual volume of petrol consumed in Nigeria.

He stated that the funds being channelled for fuel subsidy should be used to solve the concerns in other sectors of the economy.

He said, “That is the quarrel we keep having with the government because for this fuel subsidy, nobody has actually known the actual quantity of fuel that we consume in Nigeria.

He stated,  “Instead of cutting down you are increasing. Why are you increasing when you don’t know the actual volume consumed? I know they will say it is because of inflation and some other factors, but we can continue like this.”

Nzekwe added, “This will hit our economy negatively because we have been talking of how to remove subsidy and not to increase it. So this move is not well-thought out. Universities are on strike, they need money and you are increasing fuel subsidy budget, no!”

A professor of Energy Economics at Nnamdi Azikiwe University, Uche Nwogwugwu, condemned the N4tn petrol subsidy, saying that it was a tax on consumption.

He said the amount was enough to subsidise the cost of local refining, noting that channeling Nigeria’s scarce resources to subsidy when issues of funding education, infrastructure and security were on the front burner was a waste of money.

“Nobody knows the basis of the N4trn subsidy. We in energy economics say that any subsidy on petroleum is corruption. A lot of development can be done with N4trn and we can develop alternative energy sources of energy and renewable energy with that amount, to rely less on fossil fuel.”

A development economist, Aliyu Iliyas, decried the poor state of the country, urging the Federal Government to eliminate fuel subsidy.

He said, “Well, the fact remains that the country is in a serious mess as the revenue is very poor; consequently the government has to borrow. However, the government’s borrowing rate is very dangerous.

“If you look at the oil market now, the price of oil has been increasing for some time now but the country isn’t benefiting from it because we are not producing at home. Unfortunately, as the price of oil continues to rise, so also will our subsidy bail out which causes a series of problem. So the best decision is not to borrow to pay for subsidy but to remove it and focus on revamping refineries in the country, in addition to the Dangote refinery that we are waiting for.

“However with the route the government has chosen, it is clear that the economy will suffer and so will the Nigerian people. We should expect inflation to rise in the next few months and development in the country to suffer.”

After over 40 years of fuel subsidy, what we have is more hardship – LCCI

Reacting to the development, the Lagos Chamber of Commerce and Industry described the decision of the National Assembly to approve more loans for the Federal Government as one that would plunge Nigeria into “double jeopardy.”

According to the  LCCI Deputy President, Mr Gabriel Idahosa, historical antecedents have shown that fuel subsidy continues to divert a significant fraction of revenue which can be injected into other aspects of the economy for developmental purposes.

He said, “Fuel subsidy already has a negative effect on the economy. What it means is that useful resources that should go into social services like education,  healthcare,  roads and other common services that everyone should enjoy, are used to subsidise petrol, of which about 30% is actually not consumed in Nigeria.”

But the Nigeria Labour Congress  lauded the Federal Government for not removing the  fuel subsidy as earlier threatened.

The Chairman of  NLC in  Ogun  State, Emmanuel Bankole,  said the action was commendable.

He said,  “It is commendable and shows that the government is responsive  and sensitive . But, that has not solved the problem . All our refineries must be made to function.”

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