BusinessDay

2022 budget: Nigeria to spend N3trn on subsidy

The Nigerian National Petroleum Corporation (NNPC) has requested the Federal Executive Council (FEC), to approve N3 trillion as a subsidy for 2022.

The NNPC said this request became necessary following the decision to extend the payment of petroleum subsidy by the government for the next 18 months.

The Minister of Finance, budget, and national planning, Zainab Ahmed, said this while briefing journalists after the weekly council meeting presided over by President Muhammadu Buhari at the Presidential Villa, Abuja on Wednesday.

“We presented to council a request for council’s consideration to make additional funding provisions to enable us to meet incremental fuel subsidy request in the 2022 budget. You’ll recall that in the 2022 budget, as appropriated, we have made a provision of N443 billion for a subsidy for January to June”

The minister said based on the current realities including the present hardship faced by Nigerians and the lack of structures to support subsidy removal, the NNPC made a request for N3 trillion from the ministry of finance for 2022.

“What this means is that we have to make incremental provision of N2.557 trillion to be able to meet subsidy requirement which is averaging about N270 billion per month,” she said.

She said the council considered the requests and directed the ministry to approach the National Assembly for an amendment to the fiscal framework as well as the budget.

The minister also revealed that the council has approved an amendment to be transmitted to the National Assembly 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 as well restore what the lawmakers had deleted amounting to N103 billion.

“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 Nigerian National Petroleum Company (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.

Ahmed revealed that the country is currently consuming 65.7 million liters per day, adding that “now, we’ll end up with the incremental cost of N3 trillion in 2022”

The ministry will now approach the National Assembly for an amendment to the fiscal framework as well as the Budget, as well as further discuss with NNPC on how to make provisions for this and also how to rationalise this expenditure.

The FEC also approved the confirmation of ratification of the Customs Mutual Administrative Assistance Agreement between South Africa and Nigeria.

This move will allow the customs law in the respective territories to be properly observed to prevent, enhance investigation, combat customs offenses as well as 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 a 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 the exchange of information as well as strengthen our bi-national cooperation”

Following concerns raised by the President while signing the 2022 appropriation into law, the government raised an amendment which is expected to be sent to the National Assembly for passage.

The council approved amongst others, the repeal of clauses 10 and 11.

Clause 10 refers to the provision that allows the EFCC and NFIU to keep 10 percent 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 authorized 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.

The council agreed that this provision 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, totaling N103 billion, should be restored and examples of these are N22 billion that provides sinking fund to mature bonds that will be ready for payment in 2022 in the Nigerian domestic market.

Also approved is the N12 billion as counterpart funding that is required for the various rail projects

Others include 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 the service.

The funds were inserted for projects in the 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.”

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