Nigeria’s minister of finance Zainab Ahmed has announced plans to fund its 2022 petrol subsidy bill from more local borrowing and a $2.2 billion account raised from a Eurobond sale last year.
The country’s rising fiscal deficit makes a mockery of the government’s continued petrol subsidy regime that gulps over a trillion naira per annum.
“Rising oil prices has put us in a very precarious position … because we import refined products … and it means that our subsidy cost is really increasing,” Ahmed told reuters on the sidelines of an Arab-African conference in Cairo.
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President Muhammadu Buhari, who touted subsidy as ‘a scam’ before coming to power in 2015, is preparing to spend $7 billion a year in revenue on the scheme and analysts say it may not be unconnected with the imminent 2023 general elections.
There are concerns that the removal of subsidy will raise transportation costs and worsen the plight of 105 million extremely poor Nigerians, but experts are concerned with lack of transparency in the scheme.
The International Monetary Fund (IMF) says Nigeria is not going about the scheme in the right manner, noting that sustaining the regime will likely depend on overdrafts from the Central Bank of Nigeria.
The IMF says fuel subsidy impacts Nigeria’s fiscal position negatively and increases the country’s fiscal deficit.
“Certainly, subsidy is not sustainable, which is why there is need to accelerate engagement with relevant stakeholders to come up with a policy transition strategy that is sustainable, realistc and pragmatic,” Economist and the Chief Executive Officer of Centre for Promotion of Private Enterprise (CPPE) Muda Yusuf said.
