Nigeria can’t afford N3 trillion annual petroleum subsidy – Finance Minister

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said Wednesday that the federal government cannot sustain the current N250 billion monthly petroleum subsidy.

Briefing State House correspondents at the end of the weekly Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari, the minister said the costly monthly subsidy is making the Nigerian National Petroleum Company’s remittance almost zero to the federation.

“The Petroleum Industry Act has a provision that all petroleum products must be deregulated. And in the 2020 budget, we made a provision to assume that at the maximum by the end of June, we must exit subsidy. So this last FAAC the subsidy cost to the Federation was N243 billion.

“If we look at a cost of about 250 billion per month, and it has been increasing consistently. So we’re expecting something around N120 billion per month from NNPC. And now we’re getting to a point where NNPC is remitting near zero. And if we don’t stop we will get to a point where they will tell you pay me this for managing the fuel provision in the country.

“So if you take 250 billion times 12 months, that is about N3 trillion. If we don’t remove that, that is what it is costing us. This is money that we can use to apply to health and to education.
“The intervention we want to provide, it’s for between 20 to 40 million people and there is still a lot of work going on. We have a committee that is chaired by His Excellency the Vice President, state governors and a few of us ministers as members. So we have to have a landing as to the exact number between 20 to 40 million.

“We already agreed it will be N5000 and we have also agreed that the remittances have to be done digitally. So the e-naria will help, but also so are the various payment platforms that are currently available. What we will not do is paying people in cash.

“The transfers that people will receive through one kind of electronic money or the other and it’s meant to be for a period of six, nine or 12 months. So these are things that we are still in negotiation because it’s still money that would have to come from the Federation account. So everybody that is a member of FAAC will have to agree on the numbers. The maximum will be 12 months, the minimum will be will be six months,” she said.

She said the third quarter GDP report for 2021 which was released on Thursday last week by the National Bureau of Statistics shows an improvement from the contraction that was witnessed in 2020.

Asked why the growth does not impact on Nigerians, she said: “Let me say that, again, the Nigeria economy is growing. And right now we witnessed, four consecutive quarters of GDP growth. We also said that we aspire to continue to push this growth to the point where the growth supersedes the growth in our population, because that’s the time that people will actually feel the benefits.

“So, we’re pushing the bar at the third quarter of 2021. The average annual growth is now 3.3%. Our population growth is roughly about 3.2%. So, we still need to do a lot more for people to feel this. But the fact that the service sector is not in positive territory, it also means that people will actually begin to feel the difference, because it is the service sector that has the first direct impact on people.

“We entered into a recession technically and then exited recession by the fourth quarter of 2020. This report shows that we now have four consistent quarters of growth from Q4 2020 to Q3 2021. The GDP third quarter report shows a growth of 4.03% in the third quarter 2021 compared to a contraction of minus 3.62% in the third quarter of last year.

“Part of the economic activities that were the major drivers of growth within this reporting period is services which grew by 8.41%. Growth in the service sector was largely driven by better performance in the rail transport sector, pipeline sector, air transport, financial institutions, road transport sector, water transport as well as crude.
“Agriculture also grew by 1.22%. This is a slight dip compared to the 1.3% in the second quarter of 2021. And the reason for the dip has to do with a slight slowdown in agricultural activities in some parts of the country due to security.
“The growth in agriculture that is reported in this quarter is largely driven by crop production. The growth in industry has been consistent, but we have seen a slight slowdown compared to the last quarter 2021 and the contraction of the industry is driven by the poor performance of the crude oil and natural gas sectors, coal mining, quarrying, minerals as well as oil refinery.

“The Q3 GDP report indicates that the oil sector’s contribution to the GDP today stands at 7.49% while the non oil sector contribution to the GDP stands at 2.51%. This indicates that the Nigerian economy is truly very diversified with the oil sector contributing just 7.49%.
“So, factors that are responsible for this growth include the commitment of the government to continued containment of the COVID-19 pandemic, as well as the implementation of fiscal and monetary measures to support businesses contained in the Economic Sustainability Plan.

“It includes the improvement that we’ve witnessed in the rail transport sector, pipelines, air transport,

, road transport, as well as water transport. It includes improvement in the transportation and the free movement of people as well as goods as the containment measures have been really improved.

“We’ve seen also improvement in the financial services sector with higher supplementary incomes compared to 2020. There’s been improvement in electricity generation and distribution during this quarter as well as improvement in water supply, sewage and waste management and remediation activities.
“There is also indication of higher trade activities which have significantly improved compared to 2020 because of the containment measures that slowed down trade significantly. Also reported is the inflation numbers for the month of October 2021 at 15.99%.

“This is consistent with the decline that we have seen in inflation from April 2021 to date. We expect this decline to continue through the rest of the year and also throughout the year 2022. On the other hand, we have seen an adjustment that has been done in the inflation largely caused by the improvement in the food basket in the inflation mix. And this is largely due to the agricultural harvest which constitutes 50% of the basket and inflation,” she said.

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