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Amid Rising Debt, Subsidy Cost Jumps By 370%

Published

3 years ago

July 23, 2022

The cost of fuel subsidy is estimated to increase by 369.93 per cent from 2021 to 2023, according to The PUNCH.

In 2021, the Nigerian National Petroleum Corporation said fuel subsidy gulped N1.43tn, although there was no record for under-recovery in January.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, had said on Thursday at the presentation of the 2023-2035 Medium Term Expenditure Framework & Fiscal Strategy Paper in Abuja that the Federal Government had projected to spend N6.72tn on petrol subsidy payments in 2023.

However, Ahmed said subsidy payment projection was based on two scenarios, with the first being spending an estimated N6.72tn for the entire year and the second, removing subsidy by June 2023 with the government spending N3.36tn rather than the full estimated N6.72tn.

She further noted that both scenarios had implications for net accretion to the federation account and projected deficit levels.

In January this year, the Federal Government decided to retain the controversial fuel subsidy for another 18 months following threats of protests by the Nigerian Labour Congress and other interest groups.

The International Monetary Fund recently said the fear of political resistance, widespread corruption and pressure from interested groups were hampering the removal of the fuel subsidy in Nigeria.

In the first five months, Nigeria spent N1.27tn on petrol subsidy, with a plan to spend N4tn this year.

It was also disclosed that Nigerian National Petroleum Company Limited would continue to fund the N4.19tn fuel subsidies for the 2022 fiscal year on behalf of the federation despite being a commercial venture and its stance of no longer remitting any money to the Federation Accounts Allocation Committee for sharing to the three tiers of government monthly.

The increasing cost of fuel subsidy is projected to persist amid declining revenues and rising debts.

According to a recent report, the FAAC allocation to the federal, state and local governments declined to 2.18tn between January and March 2022 when compared to the N2.24tn disbursed in the preceding quarter, Q4 2021.

The Debt Management Office recently disclosed that Nigeria’s total public debt stock increased to N41.60tn in the first quarter of 2022 from N39.56tn as of December 2021, showing an increase of N2.04tn within a period of three months.

During the presentation of the MTEF and FSP paper, the finance minister disclosed that the cost of servicing debt surpassed the Federal Government’s retained revenue by N310bn in the first four months of 2022..

It was disclosed the Federal Government’s total revenue for the period was N1.63tn, while debt service gulped N1.94tn.

The IMF has also said that Nigeria will likely depend on overdrafts from the Central Bank of Nigeria to fund its proposed petrol subsidy bill.

The finance minister has also said that Federal Government was planning to tap €2bn ($2.2bn) of the money it raised in a Eurobond sale last year and targets more local borrowing in 2022 to help fund fuel subsidy.

The World Bank recently warned that increasing fuel subsidy puts the Nigerian economy at a high risk as subsidy payments could significantly impact public finance and pose debt sustainability concerns.

Related Topics:debt management office subsidy

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Business

Naira Appreciates At Official Market

Published

3 weeks ago

May 24, 2025

Editor

The Naira, which has seen steady appreciation against the Dollar all week, closed stronger on Friday, trading at ₦1,580.44 in the official forex market.

Data from the Central Bank of Nigeria’s website show the Naira gained ₦4.51k against the Dollar on Friday alone.

This marks a 0.28 per cent appreciation from Thursday’s closing rate of ₦1,584.95 in the official foreign exchange window.

The local currency maintained consistent strength throughout the week, recording gains daily.

On Monday, May 19, it traded at ₦1,598.68; on Tuesday, at ₦1,590.45; and on Wednesday, at ₦1,584.49.

These gains suggest increased investor confidence and improved forex supply, contributing to the naira’s performance.

Meanwhile, the CBN, at its 300th Monetary Policy Committee meeting held Monday and Tuesday, retained the Monetary Policy Rate at 27.5 per cent.

Business

BREAKING: Again, Dangote Refinery Cuts Petrol Price

Published

3 weeks ago

May 22, 2025

Editor

The Dangote Petroleum Refinery has announced a nationwide reduction in the pump price of Premium Motor Spirit (PMS), commonly known as petrol, with new prices now ranging between ₦875 and ₦905 per litre, depending on location.

The ₦15 per litre cut applies across all regions and partner fuel stations, and was confirmed via an official announcement posted on Dangote Refinery’s social media channels on Thursday.

Major marketers participating in the new pricing regime include MRS, Ardova, Heyden, Optima Energy, Techno Oil, and Hyde Energy — partners in the distribution of Dangote-refined products.

Under the previous pricing structure, Lagos residents paid ₦890 per litre, while prices reached ₦920 in the North-East and South-South regions. With the latest adjustment, Lagos now pays ₦875 per litre, while the North-East and South-South will see prices drop to ₦905.

A regional breakdown of the revised prices is as follows: Lagos: ₦875, South-West: ₦885, North-West & Central: ₦895, North-East & South-South: ₦905 and South-East: ₦905.

In its announcement, Dangote Refinery encouraged consumers to purchase fuel only from authorised partner stations and urged the public to report any cases of non-compliance via its official hotlines: +234 707 470 2099 and +234 707 470 2100.

“Our quality petrol and diesel are refined for better engine performance and are environmentally friendly,” the company said.

Business

Naira Appreciates Against Dollar At Foreign Exchange Market

Published

4 weeks ago

May 17, 2025

Editor

The Naira ended the trading week on a positive note, recording a bullish close on Friday at the official foreign exchange market.

It appreciated N1,598.72 against the U.S. Dollar, reflecting a modest gain that suggests continued efforts to stabilise the local currency.

According to figures published on the Central Bank of Nigeria’s official website, the Naira strengthened by N0.60k against the Dollar on Friday.

This upward movement represents a 0.03 per cent appreciation compared to the N1,599.32 exchange rate recorded at the close of trading on Thursday.

The local currency had shown some resilience earlier in the week, posting gains on both Tuesday and Wednesday trading sessions.

On Tuesday, the Naira appreciated by 0.02 per cent, followed by a stronger gain of 0.21 per cent on Wednesday.

These improvements were seen as positive indicators of growing investor confidence and increased supply in the foreign exchange market.

However, Thursday’s trading session saw a minor setback, with the Naira slipping by N2.62 against the Dollar.

This loss equated to a 0.16 per cent depreciation, dampening the midweek rally seen in previous sessions.

Market analysts attributed Thursday’s dip to a brief increase in Dollar demand from importers and other market participants.

Despite this, the week still closed on a positive note, with the Naira showing signs of gradual recovery and increased market stability.

Analysts continue to monitor the Central Bank’s policies, especially interventions aimed at improving Dollar liquidity and managing demand pressures.

The Naira’s performance in the coming weeks will likely depend on consistent supply inflows and investor sentiment across the broader economic landscape.