FG proposes N3 trillion budget for 2022 subsidy bill

• …As FEC okays amendments to 2022 Appropriation Act

By Egena Sunday Ode

The Federal Government has proposed N3 trillion to fund fuel subsidy in the 2022 Budget.

This proposal which will require amendments to the 2022 budget was approved by the Federal Executive Council, FEC, at its weekly meeting held at the Aso Rock Presidential Villa, Abuja yesterday.

Recall that the Federal Government had on Monday announced the suspension of a proposed petroleum subsidy removal, following widespread agitations and planned protests against the policy.

The Petroleum Industry Act has prescribed a total withdrawal of fuel subsidy six months after the commencement of the implementation of the law; which was the reason for the provision of subsidy for January to June in this year’s budget. 

Minister of Finance, Budget and National Planning, Zainab Ahmed, who announced the  proposal on Wednesday while addressing newsmen after the week’s  FEC meeting, also disclosed that Council had approved a proposed amendment to the 2022 Budget.

She said only N443 billion had been provided for in the 2022 Budget meant to accommodate subsidy from January to June, but taking the prevailing economic realities, both locally and globally, into consideration, Council had proposed a year-long provision for the subsidy.

According to her, the Council after considering the request, directed her ministry to approach the National Assembly for an amendment to the fiscal framework as well as the Budget. 

“We also presented to Council today a request for Council’s consideration to make additional funding provisions to enable us to meet incremental fuel subsidy request in the 2022 Budget. You’ll recall that in the 2022 Budget, as appropriated, we have made a provision of N443 billion for a subsidy for January to June. 

“Having taken into account the current realities; increased hardship in the population, heightened inflation, and also that the measures that needed to be taken to enable a smoother exit from the fuel subsidy are not yet in place, it was agreed by Council that it is desirable to exit fuel subsidy. 

“The Nigerian National Petroleum Company (NNPC) has presented to the ministry a request for N3 trillion as fuel subsidy for 2022. What this means is that we have to make an incremental provision of N2.557 trillion to be able to meet the subsidy requirement, which is averaging about N270 billion per month.

“In 2021, the actual under-recovery that has been charged to the Federation was N1.2 trillion, which means an average of N100 billion, but in 2022, because of the increased crude oil price per barrel in the global market, now at $80 per barrel, and also because an NNPC’s assessment is that the country is consuming 65.7 million liters per day, now we’ll end up with incremental cost of N3 trillion in 2022. 

“So, this has been considered by Council and we’ve also been asked to approach the National Assembly for an amendment to the fiscal framework as well as the Budget, to also further discuss with NNPC on how to make provisions for this and also how to rationalize this expenditure”, she said.

Wednesday’s FEC also approved amendments to parts of the 2022 Budget, which had initially been adjusted by the National Assembly during its legislative deliberations on the Budget proposal submitted to it by the President in 2021.

According to Ahmed, the approved amendment to be transmitted to the National Assembly will request to repeal clauses 10 and 11 concerning the Economic and Financial Crimes Commission (EFCC) and the Nigerian Financial Intelligence Unit (NFIU) operations in the 2022 Budget and as well restore what the lawmakers had deleted amounting to N103 billion. 

“The second memo we presented to Council today has to do with a request for approval of the 2022 Appropriation Amendment. If you recall, when the President signed the 2022 Appropriation into law on the 31st of December, he had raised some concerns that he had in some of the provisions in the budget and had indicated that he will be submitting an amendment proposal to the National Assembly for them to effect improvements in what has been done to the budget. 

“So, today Council took that amendment proposal and I just want to report that part of the requests that Council has approved today is for the National Assembly to repeal clauses 10 and 11. Clause 10 is referring to a provision that has been made that will enable the EFCC and NFIU be able to take 10% of whatever collections that they recover. 

“We’re asking for that to be repealed because this is in direct contrast to the Acts of these two agencies and also it is in contravention of the Fiscal Responsibility Act and the Finance Act 2021. 

“Clause 11, on the other hand, is a provision that has been made that says that the Nigeria embassies and missions are now authorized by this Appropriation Act to expend funds allocated to them under Capital Components without the need to seek approval of the Federal Ministry of Foreign Affairs. 

“This again, in a view, and Council agreed, is inconsistent with financial regulations and also inconsistent with the provisions of the Public Procurement Act. So, we are asking for this to be repealed. 

“Council also approved that some of the changes that were made in the Appropriation Act, totaling N103 billion, should be restored and examples of these are N22 billion that was provided for sinking fund to mature bonds that will be ready for payment in 2022 in the Nigerian domestic market, and also N12 billion for counterpart funding that is required for the various rail projects and N189 million to be adjusted also in the budgets of the Ministry of Transport, Secretary to the Government of the Federation and the Head of Service. 

“These are projects that are provided in these ministries that are completely unrelated to their mandate, so implementation will be a problem. Also, N5 billion to be restored for non-regular allowances of the Nigerian Navy, N15 billion to be restored for the regular allowances of the police formations and police commands and several others that Council looked at in detail. So, there’s a detailed schedule of this N103 billion that Mr. President will be formally conveying to the National Assembly to restore the adjustments that were made”, she said. 

Responding to question around the vagueness of the quantity of petroleum products consumed in the country and how the planned N3 trillion subsidy budget would be funded, the Minister said more works would be done on the proposal. 

“In the case of the budget, we’re looking at extending to December in the first instance, because this budget year is January to December and we’re going to engage NNPC to further interrogate the request that they presented with a view of trying to see how we can scale it down so that the country is not incurring N3 trillion for a fuel subsidy. 

“We agreed with the view of governors, that there is a need to scale down on the size. So even as government is not immediately removing the fuel subsidy, we have to make sure that what the nation is incurring is efficient, and that it is real cost that has been consumed by the country.

“How we fund it? So, we’ll have to reduce it from that N3 trillion and that is one. Secondly, also we have been running reconciliations with NNPC to reduce the cost, but also we have several reconciliations with NNPC and NNPC itself is owing in some cases, government. 

“So, we want to be able to settle some of the subsidy costs through this reconciliation process. So when we’re done with that, whatever is left that we’re not able to apply to what an NNPC is owing the Federation will not be increasing the deficit. And that means increased domestic borrowing. But we haven’t finished to see reconciliation. This is just the second day that this happened”, she explained.

She also disclosed that FEC ratified an instrument on diplomatic relations between Nigeria ands South Africa. 

“The first memo we presented today has to do with the confirmation of ratification of Customs Mutual Administrative Assistance Agreement between South Africa and Nigeria and the purpose for us is for the customs law in the respective territories to be properly observed to prevent and also enhance investigation and to combat customs offenses and to afford each country mutual assistance in cases concerning the delivery of documents regarding the application of customs laws in two countries. 

“The importance of this for us is cooperation between Nigeria and South Africa, as it has become even more important now with the Africa Continental Free Trade Agreement. It will also help to increase trade relations between the two countries and facilitate exchange of information as well as strengthen our binational cooperation”, she said.