A new report by the Nigerian Economic Summit Group (NESG) has disclosed that the federal government spent a total of N3.64 trillion on fuel subsidies between 2015 and 2021.
The report also stated that the amount spent by the government on payment for petrol subsidy grew from N307 billion in 2015, to N1.77 trillion in 2021. This represented a 477 per cent increase within seven years.
These were contained in the 2022 NESG Macroeconomic Outlook titled “The Last Mile: Reforms toward Significant Improvement in National Economic Outcomes,” which stated categorically that the burden of fuel subsidy cost on public finance would increase substantially in 2022 with the current upward trend being experienced in the crude oil price.
The federal government last week approved N3 trillion for subsidy payment between July and December 2022. Implementation of the Petroleum Industry Act (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), subsidy removal was deferred by 18 months.
But the NESG noted in the report that many of the challenges encountered in 2021, would become amplified in 2022 and have telling adverse impact on business productivity and citizens’ welfare if the federal government failed to initiate critical reforms that would achieve a paradigm shift in governance and policy design in Nigeria. It however projected that the economy might grow by 3.2 per cent this year under the best scenerio.
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.”
The Chief Executive Officer of the NESG, Laoye Jaiyeola, stated in the report 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 acknowledged that the country was faced with daunting challenges, but insisted that 2022 presented the government with a unique opportunity to initiate tough economic reforms that would propel sustainable economic growth and inclusive development.
The reforms required, according to the NESG, would address the long-standing issues of deregulation of the downstream sector, foreign exchange scarcity and lower investment into key sectors must be given the utmost attention in 2022.
It said: “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 Muhammadu Buhari to utilise the remaining part of his administration to intensify the pace of reforms, especially given the impact of the twin challenges of poverty and unemployment on insecurity and social cohesion of the nation.
“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 country to substantial economic progress and improved social inclusion,” the NESG said.
Dike Onwuamaeze
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