Nigeria must cut petrol subsidies and boost revenue collection to avoid a sharp deterioration in government finances next year, the nation’s budget office has said.
The budget deficit may rise to N12.4 trillion ($29 billion) next year. This is almost three times total revenue, or 5.5 per cent of Gross Domestic Product (GDP).
Nigeria spent N1.59 trillion ($3.83 billion) on fuel subsidies in the first half of the year and accrued a $1.2 billion funding shortfall for oil and natural gas projects, a report by the Nigerian National Petroleum Cooperation (NNPC) showed recently.
Budget Office say, if the government continues paying fuel subsidies, according to a medium-term expenditure framework published on the office’s website. The subsidies will cost N6.72 trillion, it said.
Government revenue of N1.63 trillion in the four months through April was 49 per cent below target mainly due to oil earnings missing forecasts and is less than the N1.94 trillion needed to cover debt-service payments, according to a presentation by Finance Minister Zainab Ahmed on the Budget Office’s website. This indicates a deficit of over N300 billion for debt servicing.
The report showed that gross oil and gas federation revenue for the first four months of the year was projected at N3.12 trillion but as at April 30, only N1.23 trillion was realised, representing a mere 39 per cent performance.
Despite higher oil prices, the report showed that oil revenue underperformed due to significant oil production shortfalls such as shut-ins resulting from pipeline vandalism and crude oil theft as well as high petrol subsidy cost due to higher landing costs of imported products.
However, non-oil taxes trailed targets marginally, with average performance of 92.6 per cent.
“Revenue performance is expected to improve in the second half of 2022 as a result of concerted efforts to address the oil theft and pipeline vandalism, the report said. It added that there is also seasonality to some of the non-oil taxes, which means that the nation expects to collect significantly more in the second half of the year.
