The 2018 Appropriation Bill now in the National Assembly raises more curiosity from the crucial issues not addressed in the budget proposal than those treated extensively. The budget is strangely silent on the thorny issue of fuel subsidy. The federal government slipped fuel subsidy through the backdoor in the last quarter of 2016 when crude oil price appreciated and pushed the landing cost of petrol perilously close to the official pump price of N145 per litre decreed by government.
Since then the Nigerian National Petroleum Corporation (NNPC) has been the sole importer of petrol with the major and independent marketers just buying from the state oil monopoly which ultimately sells the product at a colossal loss. Since the second coming of fuel subsidy, the landing cost of petrol has become official secret. However, with the pump price of diesel now above N200 per litre, everyone knows that government is subsidizing petrol heavily.
Speculations are rife that government subsidy on petrol hovers around N15 per litre and that the subsidy might hit N20 if crude oil price reaches $70.
At that rate and a daily consumption of 40 million litres of petrol, the federal government would be spending N800 million daily on fuel subsidy. That would amount to a minimum of N292 billion by the end of 2018. That is more than the sum set aside in the 2018 Appropriation Bill for investment in transportation which includes the rehabilitation of dilapidated rail system.
There was no provision for fuel subsidy in the 2017 Appropriation Act, but the federal government is known to be spending a minimum of N5 per litre on fuel subsidy since the first quarter of this year. The unappropriated spending is written off by NNPC as trade losses. The practice which has lasted for more than one year now is illegal and fraught with the danger of fraud.
Even with President Muhammadu Buhari as minister of petroleum resources, the chances of NNPC exaggerating the cost of fuel subsidy behind the president is very high. The federal government should list its expected expenditure on fuel subsidy in the 2018 Appropriation Bill to ensure that a fix amount is allocated for it by the National Assembly. If government fails to seek a legal way out of the problem, the National Assembly should compel it to make provision for fuel subsidy in the 2018 Appropriation Bill since it is now an open secret that the ex-depot price of fuel is higher than the official pump price of the product. If everything works according to plan, the 2018 Appropriation Bill might be the last to provide for fuel subsidy. Aliko Dangote’s refinery in Lagos would almost certainly come on stream in 2019 thus signaling the end of Nigeria’s shameful dependence on refined petroleum products import and the attendant imported inflation.
The 2018 Appropriation Bill also maintains graveyard silence on the issue of minimum wage even as the federal government has set up a committee to negotiate considerable hike from the current minimum wage of N18, 000.
The impending negotiation with the labour unions would almost certainly result in considerable hike in minimum wage even if government succeeds in restricting it to junior workers. The silence in the Appropriation Bill on the issue might emanate from the fact that the architects of the budget were reluctant to give away government’s position on the issue. The truth, however, is that even if government negotiators are shrewd enough to peg minimum wage at the N30, 000 proposed by the House of Representatives which was promptly rejected by the labour unions, there is going to be significant increase in the federal government’s recurrent expenditure which would exert considerable upward pressure on projections made in the 2018 Appropriation Bill.
That takes us to the ambitious projection for inflation rate in the bill. Architects of the 2018 Appropriation Bill expect inflation rate to drop to 12.4 per cent during the year. That projection does not take into consideration the get-rich-quick mentality of Nigeria’s greedy retailers who would automatically hike prices by 50 per cent as soon as minimum wage negotiations with labour unions enter top gear.
Besides, Godwin Emefiele dropped hints of plans by the Central Bank of Nigeria (CBN) to ease its merciless grip on liquidity by initiating a climb down on its monetary policy rate (MPR). The CBN governor said last week at a forum that the apex bank was poised to lower its monetary policy rate to make the creation of risk assets by banks more attractive.
The CBN’s decision to ease its tight grip on lending rates is an invitation to a liquidity rain that would inevitably fuel inflation. Ironically, Emefiele is optimistic of attaining low double digits or high single digit inflation rate in 2018. If the current pace of inflation rate movement is a yardstick for measuring what would happen in 2018, the budget inflation rate target of 12.4 per cent remains a Herculean task.
Since inflation rate started to climb down some 15 months ago, it has only managed to drop by less than 2.5 per cent. Only an incurable optimist would expect it to drop by close to four per cent in 12 months.