Economy Toughens as N470.6b Oil Revenue Goes into Subsidy Payment in May

Subsidy

The projection by economists over the years that Africa’s largest economy will experience a massive fiscal crisis is not out of place after Nigeria failed to remit funds into its account despite N1.897 oil revenue.

While announcing its oil revenue, the Nigerian National Petroleum Corporation (NNPC), said there was no money to remit to the federation account, a joint pool operated by the federal, state, and local governments.

Details of the June FAAC report obtained by TechEconomy reveal that NNPC since the start of the year made N1.897 trillion, over N234.1 billion more than the expected revenue.

The oil revenue generated was used to pay for petrol subsidy, oil search, pipeline security & maintenance cost, National Domestic Gas Development, and Nigeria Morocco Pipeline cost among others.

NNPC said in its report that it paid N327.06 billion as subsidy in May, representing a 20.4 percent increase from the previous month and the highest on record this year.

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Analysis of the report shows that the oil firm paid N210.38 billion, N219.78 billion, N245.77 billion, and N271.59 billion as subsidies on petrol in January, February, March, and April, respectively.

The report reads: “the Value Shortfall on the importation of PMS recovered from May 2022 proceeds is N327,065,907,048.06 while the outstanding balance carried forward is N617bn .”

“The estimated Value Shortfall of N845,152,863,012.97bn (consisting of arrears of N617bn plus estimated May 2022

Value Short Fall of N227,721,200,478.23) is to be recovered from June 2022 proceed due for sharing at the July 2022 FAAC Meeting,” it added.

President Muhammadu Buhari’s administration recently deferred the implementation of the full removal of subsidy by 18 months, effectively pushing it to the next government which begins in May next year.

TechEconomy reported on Monday that the Nigerian government must be transparent and decisive in dealing with the issue of subsidy after economists warned that the payment was fraudulent and unproductive.

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Fuel Subsidy

During the hybrid launch of the World Bank’s Nigeria Development Update titled: “The Urgency for Business Unusual,’ held in Abuja. Some of the key stakeholders said continuous retention of the controversial fuel subsidy regime was hurting Nigeria’s ability to service its debts.

Zainab Ahmed, Minister of Finance, Budget and National Planning said subsidy is costing Nigeria an additional N4 trillion than originally planned which is an unplanned deficit.

“We have gone to the National Assembly; we have gotten approvals, but the approval was simply for us to cut down on some of the investment costs.

“So, investments that we needed to make in oil and gas sector which we are delaying and deferring to a later time and reducing the rollout of those investments. But we also had asked that we needed to borrow more which is very serious.

“Already we have borrowing increasing significantly and we are struggling with being able to service debt because even though revenue is increasing, the expenditure has been increasing at a much higher rate so it is a very difficult situation.”

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She said further: “So Nigerians need to understand that this PMS subsidy we are carrying now is hurting the nation, its impeding the government’s ability to be able to invest in human capital development. N4.5 trillion is money that we could have invested in health or education.

“But where we are investing it in consumption, which is very wasteful, because how many Nigerians own cars that are benefiting from this subsidy.”



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