Nigeria: Cash-Strapped FG Approves N3tn, 17.5% of 2022 Budget to Sustain Subsidy

A day after the federal government announced its plan to delay implementation of the Petroleum Industry Act (PIA) and retain payment of petrol subsidy for 18 months, the government on Wednesday approved N3 trillion for the new subsidy regime. The Federal Executive Council (FEC) approved the sum at its weekly meeting in Abuja.

The N3 trillion now budgeted to sustain the payment of subsidy in 2022 alone, amounts to 17.5 per cent of the total of N17.126 trillion 2022 budget that was signed into law on the last day of 2021. Already, the approved 2022 budget has a deficit of N6.39 trillion, which is 37 per cent of the N17.126 trillion. This is a clear indication that the government may borrow more this year than it had earlier projected.

The N3 trillion approved by FEC is 55 per cent and 43 per cent of the capital component and recurrent expenditure of the 2022 budget, respectively.

Implementation of the PIA, which stipulates the removal of petrol subsidy, was initially meant to commence in February 2022, but it was later shifted to July 2022. However, due to pressure and threat of protest by the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC), the removal of subsidy was suspended on Monday.

But NLC, Lagos chapter, yesterday criticised the federal government’s decision to recommend an 18-month extension of the PIA to the National Assembly.

On its part, the Independent Petroleum Marketers Association of Nigeria (IPMAN) urged the federal government to introduce palliatives to cushion the effect of subsidy withdrawal, irrespective of the postponement of the policy, as well as fix all the country’s refineries.

Meanwhile, Chairman of the Nigeria Governors Forum (NGF) and governor of Ekiti State, Dr. Kayode Fayemi, said only about eight states were presently benefitting directly from petrol subsidy. Fayemi said this at a joint meeting between the state governors, NLC, and TUC over the fuel subsidy withdrawal.

FEC yesterday mandated the Finance, Budget and National Planning Ministry to reconcile the fuel subsidy budget with the Nigerian National Petroleum Company (NNPC) Limited, which prepared the estimate.

The council meeting presided by President Muhammadu Buhari also okayed the preparation of the 2022 Supplementary Budget, which would include the repeal of Clauses 10 and 11 of the Appropriation Act as well as incorporation of N103 billion removed by the lawmakers from the initial budget estimates, for submission to the National Assembly for approval.

The decisions reached at the virtual FEC meeting were made public by the Minister of Finance, Budget and National Planning, Zainab Ahmed, who briefed newsmen after the meeting.

Ahmed said a memo in respect of the additional funding provisions to enable government meet the incremental fuel subsidy request in the 2022 budget was presented for the council’s consideration.

She said only N443 billion had been provided for in the 2022 budget to accommodate subsidy from January to June, but taking the prevailing economic realities, both locally and globally, into consideration, FEC proposed a year-long provision for the subsidy.

Ahmed said the request was considered by the council, which directed the ministry to approach the National Assembly for an amendment to the fiscal framework as well as the budget.

The minister explained, “You would recall that in the 2022 budget, as appropriated, we have made a provision of N443 billion for subsidy for January to June. 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 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, and also because an NNPC’s assessment is that the country is consuming 65.7 million litres per day, now we’ll end up with incremental cost of N3 trillion in 2022.

“So, this has been considered by Council and we’ve also been asked to approach the National Assembly for an amendment to the fiscal framework as well as the budget, to also further discuss with NNPC on how to make provisions for this and how to rationalise this expenditure.”

The minister added that her ministry had been directed to engage the NNPC with the possibility of bringing down the subsidy estimate.

She stated, “We’re going to engage NNPC to further interrogate the request that they presented with a view of trying to see how we can scale it down so that the country is not incurring N3 trillion for a fuel subsidy.

“We agreed with the view of governors, that there is a need to scale down on the size. So even as government is not immediately removing the fuel subsidy, we have to make sure that what the nation is incurring is efficient, and that it is real cost that has been consumed by the country.”

Ahmed stated that the government would fund the N3 trillion subsidy regime through outstanding debts owed it by NNPC, which were being sorted out through on-going financial reconciliations with the company.

According to her, “We have several reconciliations with NNPC, which is owing, in some cases, the government. So we want to be able to settle some of the subsidy costs through this reconciliation process.

“When we are done with that, whatever is left that we are not able to apply to what NNPC is owing the federation will not be increasing the deficit. And that means increased domestic borrowing. But we haven’t finished with the issue of reconciliation.”

Ahmed further disclosed that FEC approved the 2022 Supplementary Budget to take care of areas that were overlooked by the National Assembly in approving the Appropriation Bill. She said FEC approved amendments to parts of the 2022 budget, which had initially been adjusted by the National Assembly during its legislative deliberations on the budget proposal submitted to it by the president in 2021.

According to her, the approved amendment to be transmitted to the National Assembly will request 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 restore the N103 billion the lawmakers had removed.

She said, “The second memo we presented to Council today has to do with a request for approval of the 2022 Appropriation Amendment. If you recall, when the president signed the 2022 appropriation into law on the 31st of December, he raised some concerns that he had in some of the provisions in the budget and had indicated that he will be submitting an amendment proposal to the National Assembly for them to effect improvements in what has been done to the budget.

“So, today Council took that amendment proposal and I just want to report that part of the requests that Council has approved today is for the National Assembly to repeal clauses 10 and 11. Clause 10 is referring to a provision that has been made that will enable the EFCC and NFIU be able to take 10 per cent 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 authorised 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. This, again, Council agreed, 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, totalling N103 billion, should be restored and examples of these are N22 billion that was provided for sinking fund to mature bonds that will be ready for payment in 2022 in the Nigerian domestic market, and also N12 billion for counterpart funding that is required for the various rail projects, and 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 Service.

“These are projects that are provided in these 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.”

Ahmed also disclosed that FEC ratified an instrument on diplomatic relations between Nigeria and South Africa.

She said, “This has to do with the confirmation of ratification of Customs Mutual Administrative Assistance Agreement between South Africa and Nigeria and the purpose for us is for the customs law in the respective territories to be properly observed to prevent and also enhance investigation and to combat customs offenses and to 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 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 exchange of information as well as strengthen our bi-national cooperation.”

NLC Knocks FG for Proposing 18 Months Extension

NLC said the federal government was only postponing the evil day. Chairperson of NLC, Lagos Chapter, Agnes Sessi, spoke yesterday on “The Morning Show,” a programme on Arise News Channel, the broadcast arm of THISDAY Newspapers. Sessi said government had been very deceitful, as it had never fulfilled its promises to Nigerians regarding the maintenance of the refineries.

She stated that successive governments had deceived the populace into believing that they had to subsidise petrol.

Sessi said, “We need a concerted effort to fight the problem of corruption in our society, we thought it could be better during this administration, but it is getting worse. Everybody needs to speak and kill the slogan, which says if you cannot beat them, you join them.

“We are not supposed to join them because successive governments have been unable to do the turnaround maintenance, despite the huge amount of money they have spent.”

Defending accusations that the NLC was engaged in smuggling of petrol, Sessi insisted it was simply blackmail because they chose not to be a part of the evil plans.

She advised that people should stop shifting the blame to labour, saying the unions are only a fraction of Nigerians.

“It’s because government has seen the kind of mobilisation and that we were serious, that is why they made a U-turn and reversed their decision that would have caused problems and pushed Nigerians to the highest level of economic downturn,” Sessi concluded.

On his part, the Director General (DG) of Micheal Imodu Institute of Labour Studies, Issa Aremu, commended the leadership of NLC for remaining focused and for keeping to the tradition of the movement of engaging policies.

According to Aremu, “I’ve been involved in this process so I know what it takes to mobilise and demobilise. I am happy that inclusive issues of development are up for discussions.”

He also said, “I am happy that we are all on the same page and it can be business as usual within the petroleum downstream sector.

“This has been a long drawn issue and I think additional 18 months cannot be too long for us to look at all the issues as we are looking at nation building and not the regime. We shouldn’t be a debating but functional society.”

He called on the relevant stakeholders to stop hoarding petroleum products while the transition process is being managed.

The director general insisted that labour should be a little more balanced, saying the government had retained jobs and paid salaries as and when due.

IPMAN Wants Dilapidated Refineries Fixed

National Operations Controller, IPMAN, Mike Osatuyi, reiterated their support for the federal government in whatever decisions they made. Osatuyi noted that the 18 months suspension would give the government the avenue to put in palliatives and support for Nigerians.

Osatuyi also clarified the notion about the group being government agents, stating that they are an association of businessmen who condemn subsidy.

IPMAN, in a statement, appealed to the federal government to give priority to the revitalisation of the four refineries in the country ahead of the removal of the subsidy on petroleum products.

President of IPMAN, Alhaji Debo Ahmed, in the statement, also appealed to the federal government to ensure the availability of petroleum products to the NNPC depots across the country. He stated that selective supply to private depots was, “making it impossible for the product to be sold at the government upper price band.”

The IPMAN president restated his association’s demand for payment of outstanding Bridging Claims owed marketers by the defunct Petroleum Equalisation Fund, now operating under the name, Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

The statement said, “The leadership of IPMAN commends the federal government for the suspension of the removal of fuel subsidy. We reiterate our position that the four nations’ refineries be repaired and allowed to function optimally before the removal of fuel subsidy.

“We also use this opportunity to call on the federal government to resume the supply of petroleum products to NNPC depots nationwide as against the selective supply to private depots, making it impossible for the product to be sold at the government upper price band.

“Our huge funds are tied up with PPMC Ltd, a subsidiary of NNPC, where members pay for NNPC products supplied to their depots. We are equally pleading that marketers transportation claims be paid to allow members remain afloat in business.”

Meanwhile, Fayemi told the governors’ meeting with NLC and TUC that only about eight states benefitted from the federal government’s fuel subsidy.

Participants at the meeting called on the federal government to constitute a forensic examination on the activities of the NNPC. They alleged that the national oil company was bandying falsehood in terms of the amount being spent on petrol subsidy.

The meeting, which was held at the NGF secretariat, Abuja, brokered a partnership between the NGF and labour.

Delivering his opening remarks at the meeting, Fayemi argued that the country’s economy was at a precipice and, “it has become necessary for the two groups to carefully verify all of NNPC’s estimates to ensure that whatever action is taken on subsidy, it would be the people that get direct benefits and not a few wealthy individuals and their cronies in the country.”

Fayemi told the labour leaders that subsidy removal had remained an on-gong conversation, not just among governors, but also the country at large.

The Ekiti State governor stated that, “There are raging questions of accountability associated with subsidy removal in the country and observed that the NGF and the NLC can jointly work together to proffer solutions that heal the economy and provide succour to the Nigerian people.”

The NGF chairman had led to the meeting the delegation of governors, which included Simon Bako Lalong of Plateau State, who is also chairman of the Northern Governors Forum, and Governor Godwin Obaseki of Edo State. He stressed that all the countries surrounding Nigeria, including Niger, Mali, Cameroun and Ghana, had their fuel pump price in dollar equivalent.

 Deji Elumoye, Chuks Okocha  in Abuja; Emma Okonji and

Nosa Alekhuogie in Lagos