By Milcah Tanimu
The Federal Government of Nigeria may incur a fuel subsidy expenditure of approximately N5.4 trillion, according to a proposed economic stabilization plan outlined in the Accelerated Stabilization and Advancement Plan report, obtained Online on Wednesday.
Presented by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, to President Bola Tinubu, this plan aims to expedite economic recovery, support a broad segment of the population, and mitigate the effects of ongoing economic reforms. The implementation period for this plan is between one to six months, focusing on controlling inflation and boosting purchasing power.
The report highlights the subsidy payments as one of the significant challenges threatening the president’s bold reforms. It states, “Fuel subsidy: At current rates, expenditure on fuel subsidy is projected to reach N5.4 trillion by the end of 2024. This compares unfavourably with N3.6tn in 2023 and N2.0tn in 2022.” This figure translates to an average monthly subsidy bill of N450 billion.
Despite government claims of removing fuel subsidies, the document reveals that subsidies have not been entirely eliminated due to ongoing inflation and social pressures. It recommends establishing a framework for market-driven pricing of petroleum products and a complete phase-out of fuel subsidies to promote growth in the oil sector.
Government officials, including the Minister of State for Petroleum Resources, Heineken Lokpobiri, have consistently denied the reintroduction of subsidies. Lokpobiri stated, “The president had rightly said, on the day he was sworn in, that subsidy is gone. The last government did not make any provision for subsidy in the 2023 budget. And I can confirm to you that subsidy is gone. But there could be strategic interventions from time to time.”
However, the International Monetary Fund (IMF) and other stakeholders have noted that the reintroduction of fuel subsidies by the Tinubu administration could consume nearly half of the projected oil revenue for the year. The IMF reported that to help Nigerians cope, authorities started capping fuel pump prices below cost, effectively reintroducing implicit subsidies by the end of 2023.
The report also identifies other economic challenges such as high inflation, restrictive interest rates, and a volatile exchange rate, which hinder macroeconomic stability. It suggests that the finance minister should consider various non-exclusive options to address these issues, including prioritizing initiatives to reduce supplementary budget requirements, seeking supplementary budget funding, reallocating the current budget, and selling government assets.
Constrained revenues have impacted the government’s ability to meet financial projections for the 2024 budget. The report indicates that achieving the budgeted revenue increase of 77.4 percent from 2023 is at risk if oil production continues to lag, with actual revenue likely to fall short of the projected N15.7 trillion.
The stabilization plan is designed to advance President Tinubu’s economic priorities, covering key areas such as agriculture and food security, energy (oil, gas, and power), health and social welfare, and business support.
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