The Nigerian Senate on Wednesday approved the N8.4 trillion borrowing plan presented to it by President Muhammadu Buhari, aimed at funding fuel subsidies in 2023.
The approval defied the recommendation of the Senate Committee to slash the N3.6 trillion mapped out for the subsidy to N1.7 trillion. Buhari is to present N19.76 trillion 2023 Appropriations bill to the joint session of the National Assembly on Friday.
The N3.6 trillion subsidy fund is to cover from January to June 2023, when the Buhari administration has set to end the subsidy regime. The N3.6 trillion was factored in the 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP).
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The Minister of Finance, Budget and National Planning, Zainab Ahmed, had in August, told the House of Representatives’ Ad Hoc Committee investigating the Petroleum Products Subsidy Regime from 2013 to 2022, that not ending the subsidy means that the federal government will have to borrow more than N6 trillion to offset the budget deficit that will result from it.
“One thing that stands out in the Medium Term Expenditure Framework was that if the nation holds on to fuel subsidy as it is designed now, we will be incurring from January to December, a subsidy cost of N6.4tn. But we suggested to the Federal Executive Council, and the council approved that, maybe, we could look at the option of exiting the subsidy (regime) half year. So, if we did that, then the cost would be N3.35tn, which is half of the N6.7tn,” she said.
The Senate Joint Committees on Finance and National Planning and Economic Affairs, which worked on the fiscal document, had recommended that the cost of petroleum subsidy be capped at N1.7trn in 2023. This is after Ahmed informed the Committee that under-remittance from revenue-generating agencies have made it impossible for the government to fund the subsidy in 2023 without borrowing.
However, the Senate approved a fiscal deficit of N11.3 trillion, projected revenue of N9.352 trillion and new borrowings of N8.437 trillion (including foreign and domestic borrowing), subject to the provision of details of the borrowing plan to the National Assembly.
In addition, the Senate approved an increase in the oil benchmark from $62 to $73 per barrel and a daily oil production of 1.83 million barrels per day, an increase from the current oil output that has fallen below 1mbpd.
In its recommendation, the Senate also gave a nod to the exchange rate of N437.57/US$1 and the projected Gross Domestic Product (GDP) growth rate of 3.75%; as well as 17.16% inflation rate.
The red chamber of the national assembly also consented to the Statutory transfers totaling N722.11 billion; Debt Service estimate of N6.31trn; Sinking Fund to the tune of N247.7bn; Pension, Gratuities and Retirees Benefits of N827.8bn.
Nigeria’s revenue growth has been dampened by some factors that have apparently slipped out of government’s control. At the helm of these factors is crude oil theft.
On Tuesday, the Chief Executive of Nigeria National Petroleum Company Limited (NNPC), Mele Kyari, revealed that the company has uncovered an illegal 4km pipeline that has operated undetected in the past nine years, from the Forcados export terminal Delta State into the sea, exporting about 250,000 barrels of oil per day.
“Oil theft in the country has been going on for over 22 years, but the dimension and rate it assumed in recent times is unprecedented,” Mr Kyari said.
The Senate President Ahmad Lawan said based on observations and findings made by the Senate Committee, Nigeria is in a war situation as far as crude oil theft and under-remittance of revenue by many of the MDAs are concerned.