The current fiscal impact of fuel subsidy has shown that it is not sustainable, President Muhammadu Buhari said on Friday during the presentation of the 2023 budget to the National Assembly.
“As a country, we must now confront this issue taking cognisance of the need to provide safety nets to cushion the attendant effects on some segments of society,” he said. “Discontinuing the policy is necessary for the country to manage limited resources.”
According to him, as the country seeks to grow its government revenue, it must also focus on the efficient use of limited resources.
“The critical steps we are taking include immediate implementation of additional measures towards reducing the cost of governance and the discontinuation of fuel subsidy in 2023 as announced earlier,” Buhari said.
The President, however, hinted that provisions would be made to cushion the effects of subsidy removal.
“We are however mindful of the fact that reducing government spending too drastically can be socially destabilising, and so will continue to implement programmes to support the more vulnerable segments of society,” he said.
The N19.76 trillion proposed for the 2023 budget represents a 15.37 percent increase on the 2022 budget.
In July this year, the federal government projected that the petrol subsidy will gulp N6.7 trillion in 2023 if bold steps are not taken to do away with it, even as the debt service outpaced its revenue in the first four months of this year.
In August, Zainab Ahmed, minister of finance, budget and national planning said the federal government of Nigeria spends N18.397 billion on petrol subsidies daily.
She disclosed that the government spends N238 per litre of petrol or N18.397 billion daily as a subsidy.
Zainab said, “For 2023, the projection is that the average daily truck out will be N64.96 million litres per day; that is about N65 million per day, using an average rate at the open market rate of N448.20k and then a regulator pump price of N165 per litre.
Furthermore, the Nigerian National Petroleum Company (NNPC) Limited incurred an estimated petrol subsidy of N3.1 trillion from January to August this year.