Fuel subsidy payments in Nigeria rise by 477% in 7yrs of the Buhari administration
Fuel subsidy payments in Nigeria: According to a new analysis released by the Nigerian Economic Summit Group (NESG), the federal government spent N3.64 trillion on fuel subsidies between 2015 and 2021.
The article stated the amount spent by the government on fuel subsidy payments increased from N307 billion in 2015 to N1.77 trillion in 2021. Within seven years, this amounted to a 477 per cent increase.
These were contained in the NESG Macroeconomic Outlook for 2022, titled “The Last Mile: Reforms Toward Significant Improvement in National Economic Outcomes,” which stated categorically that, given the current upward trend in crude oil prices, the burden of fuel subsidy costs on public finances would increase substantially in 2022.
The federal government authorized N3 trillion in subsidy payments for the period July to December 2022 last week. The Petroleum Industry Act (PIA), which mandates the elimination of the gasoline subsidy, was supposed to go into effect in February 2022, but it was pushed back to July 2022. Subsidies were deferred for 18 months due to lobbying and threats of protest from the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC).
However, according to the NESG, many of the challenges faced in 2021 will be amplified in 2022, having a significant negative impact on business productivity and citizen welfare if the federal government fails to implement critical reforms that will result in a paradigm shift in Nigerian governance and policy design. The economy, on the other hand, is expected to rise by 3.2 per cent this year in the best-case scenario.
It said: “From the government fiscal position, between 2015 and 2021, Nigeria has spent a cumulative sum of N3.64 trillion on fuel subsidies, rising from N307 billion in 2015 to N1.77 trillion in 2021 – representing a whopping increase of 477 per cent.
“However, with the current rebound in the crude oil price, the burden of fuel subsidy cost will increase. On the other hand, the private sector argued that without a fair pricing system that comes with deregulation, expected inflows of investments would be hard to achieve; meanwhile, the average citizens considered the inflationary pressure that would come with subsidy removal and the impacts on the cost of living and welfare.”
Laoye Jaiyeola, the Chief Executive Officer of the NESG disclosed in the article that: “the year 2022 presents opportunities to initialise critical reforms to achieve a paradigm shift in governance and policy design in Nigeria.
“If we miss these opportunities for critical reforms, many of the challenges encountered in 2021 will become amplified, leading to an adverse impact on business productivity and citizens’ welfare.
“In the NESG Macroeconomic Outlook for 2022, we highlight the need for reforms that will sustain the recovery of output and ensure improved social inclusion in Nigeria. We believe that the role of government is to ensure reforms translate to a friendly business environment and better welfare conditions for households in the country.”
The NESG admitted that the country faced significant issues, but claimed that the year 2022 provided the government with a once-in-a-lifetime opportunity to implement tough economic changes that would lead to long-term economic growth and inclusive development.
According to the NESG, the essential reforms will address long-standing challenges such as downstream deregulation, foreign exchange scarcity, and lower investment in vital sectors, and must be given top priority in 2022.
It disclosed: “The deregulation of the downstream oil and gas sector, for example, is needed at this critical time when massive investments are required to fix the deteriorating state of the existing refineries.
“This will address the predicament of huge importation of refined fuel products that deprive the country of the foreign exchange required to meet other important obligations.
“Implementing these reforms will undoubtedly come at a cost to the government, businesses and citizens. However, the herculean task before the government is to ensure that these costs are minimised in order to create a win-win situation for every stakeholder and, in turn, advance the country on the path of development.”
It urged President Buhari to use the remaining months of his presidency to accelerate reforms, especially given the impact of the country’s twin crises of poverty and unemployment on insecurity and social cohesion.
“In order to secure the future of Nigeria, the government must recognise the urgency of now. Economic and social reforms that will create jobs and improve the lives of Nigerians should be non-negotiable in 2022.
“While there is considerable improvement in some areas, such as the mobilisation of nonoil revenue in the last few years, one thing is clear: Nigeria cannot afford to continue with its business-as-usual approach in policymaking and execution.
“The challenges associated with insecurity, rising prices, unemployment, and lower investments intensify the need for reforms that will lead the
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