The Nigerian National Petroleum Corporation, (NNPC) and the World Bank, have warned that the huge burden Nigeria is incurring in the cause of taking care of the controversial petrol subsidy may hamper the ability of the three-tiers of government to pay salaries in 2022.
According to a statement from the NNPC, its Group Managing Director, Mele Kyari, during a panel session at the launch of World Bank’s Nigeria Development Update (NDU) bi-annual report, said, “The NNPC may have to start invoicing the federation to be able to maintain subsidy”.
Kyari pointed out that while all over the world, subsidies are introduced to bring cost control and less pain to citizens, in Nigeria, fuel subsidy has become a major financial burden that must be eliminated.
Nigeria is sinking under the weight of petrol subsidy, which is set to cost the country some N3 trillion this year, more than the country has spent on capital projects each year since 2016.
Recall that the Federal Government passed the Petroleum Industry Act (PIA) last August after many years of dilly-dallying. Although the law abolishes the petrol subsidy practice, the government has carried on with it despite the drain it has increasingly become on the country’s finances.
Speaking further, the Lead Economist, Nigeria Country office of the World Bank, Marco Antonio Hernandez, painted a gloomy picture of Nigeria if the country decides to continue with the controversial fuel subsidy.
Hernandez, who provided insights into the NDU report, titled: “Time for Business Unusual”, stated that should the current revenue challenge continue till 2022, only Lagos State would be able to meet its financial obligations.
Calculations have shown that Nigeria’s petrol subsidy spree projected to hit N3 trillion, based on current market realities, is 46percent higher than the N1.6 trillion ($4 billion) the government raised through a Eurobond in September.
According to data from the Central Bank of Nigeria, (CBN), the Federal Government’s fiscal deficit hit N2.4 trillion in the first quarter of 2021, up from N1.6tr in the fourth quarter of 2020 and N1.4tr in the first quarter of 2020; that is after the government kept up with its expenditure plans but fell way short of its revenue projection.
Also, World Bank’s data showed the cost of petrol subsidy is at a six-year high, from N107 billion in 2020 to N864 billion between January and September 2021, significantly reducing fiscal space for social spending.
The global Bank raised concerns that the subsidy mostly benefits the rich and those who smuggle PMS to neighboring countries. Consequently, it recommended that the N3 trillion recovered revenue should be redirected immediately to deliver N600 billion in cash support to the people over six months.
The Bank also recommended that the Federal Government allocate N850 billion to national priority programmes for security, interstate connectivity and power sector recovery, while N774 billion should be kept for local government development funds for primary healthcare, water and sanitation, and community development.
Its Country Director for Nigeria, Shubham Chaudhuri said 20 million Nigerians comprising 10 million each from the national and local can benefit from N5,000 per month cash for the people in six months.
