There are indications that Nigerians may begin to pay full price for Premium Motor Spirit (PMS) otherwise known as petrol as the federal government expressed its readiness to comply with the provisions of the Petroleum Industry Act (PIA).
Minister of Finance, Budget and National Planning Hajiya Zainab Ahmed said this during the public presentation of approved 2022 federal government budget Wednesday in Abuja.
President Muhammadu Buhari had on 31st December, 2021, signed the Appropriation Bill into law despite some worrisome injections by the National Assembly.
The PIA stipulates that the prices of all petroleum products shall be deregulated.
Already, the prices of diesel and kerosene, among others have long been deregulated.
Minister explains
Addressing journalists in Abuja, the minister said: “From July to December, there is no provision made for subsidy. Our assumption is that by June, we would have been able to work through a process with all stakeholders, NOC, oil regulators, different MDAs that have a role to play as well as businesses. The PIA has made a provision that prices of products in the petroleum sector must be deregulated. And so far, we have been able to deregulate kerosene prices, diesel prices, the only one that is still not deregulated is PMS. We are trying to comply with the law because the PIA is an Act of the NASS and government has a responsibility to comply.
“And so, what do we do in terms of providing succour to mitigate the impact of the removal of fuel subsidy on the citizens. Maybe one of the things we should do is to provide a transport subsidy in form of N5,000 or any amount that may later be agreed. The idea is to provide subsidy in the hands of people that really need it. That is a proposal from the ministry along with other proposals and it will be discussed and everybody will agree on the one that is most practical and easier to implement, especially as we want to make sure that only the right people get the subsidy.
“One other proposal that has been brought forward which is very key, is for us to identify through the transport workers union, commercial vehicles’ drivers; get them registered and pass the subsidy through them using vouchers. So, there are several options that we are currently working on. The committee again and part of their work is to engage labour, so that we are able to comply with the provisions of the Petroleum Industry Act.”
The 2022 budget is predicated on the following: Oil Price Benchmark 62/barrel; Oil Production (mbpd) 1.88; Exchange Rate (N/$) 410.15; Inflation rate 13%; N119.28 trillion; N184.38 trillion; and GDP Growth Rate 4.20%.
Debt servicing
On debt servicing, Mrs Ahmed said the federal government is to spend N3.61 trillion to service its debt in 2022 fiscal year. The figure, according to estimates, accounts for 34 per cent of the 2022 projected budget.
Data from the Debt Management Office (DMO) published last year revealed that Nigeria’s debt stood at N38trillion as of the end of September 30, 2021.
Despite the rising debt profile, Mrs Ahmed insisted the country’s debt was still within sustainable limit.
“However, Nigeria’s Debt Service/Revenue ratio (76% as at November 2021) is the highest among same African top economies; this is proof that what we have is not a classic debt sustainability problem, but a revenue challenge,” she argued.
According to the minister, projected aggregate revenue available to fund the 2022 budget of N10.74 trillion (inclusive of GOEs) is 32% higher than the 2021 projection of N8.12 trillion. Without the GOEs retained revenue, the FGN revenue is projected at N9.01 trillion.
She explained that to improve government revenue and entrench fiscal prudence, the ministry initiated the Strategic Revenue Growth Initiatives (SRGI).
She listed the initiatives to include: “Improving the tax administration framework including tax filing and payment compliance improvements; Identifying and plugging existing revenue leakages to enhance tax compliance and reduce tax evasion; Leveraging technology and automation; and Plugging fiscal drainers like subsidies.
“To further enhance Independent Revenue collection, Government aims to optimize the operational efficiencies and revenue generation focus of GOEs Introduction of new and further increases in existing pro heath taxes for example, excise on carbonated drinks.”
Tax on non-alcoholic item, others
She further said part of the initiative to raise revenue for the government includes the imposition of a N10 per liter excise duty tax on all non-alcoholic, carbonated and sweetened beverages.
The excise duty tax is one of the amendments made in the Finance Act 2022 which was signed into law by President Buhari on December 31 last year.
She said the purpose of the additional tax was to discourage the consumption of excessive sugar among Nigerians, which, according to her, contributes to diabetes and obesity.
The minister further said the new measure was in line with the 2022 Budget priorities which enabled the government to introduce new sugar tax to raise revenue for health-related and other critical expenditures.
About four million Nigerians suffer from diabetes linked to excess sugar consumption.
Nigeria ranks the 4th highest soft drink consuming country globally, with over 40 million litres sold yearly.
