FG Plans To Spend 6.72trn On Subsidy In 2023
The Federal Government has concluded plans of making provision for subsidy in 2023 to the tune of N6.72 trillion.
This was made known by the Minister of Finance Budget and National Planning, Mrs Zainab Ahmed on Thursday in Abuja during the 2023 – 2025 Medium Term Expenditure Framework and Fiscal Strategic Paper (MTEF and FSP) Public Consultation.
Zainab Ahmed revealed that the government has projected fiscal outcomes in the medium term under two scenarios based on the underlying budget parameters/assumptions.
Under the first scenario, the Minister said that “the subsidy on PMS is estimated at N6.72 trillion for the full year 2023”. This amount she said “will remain and be fully provided for by the NNPC on behalf of the federation”.
The second scenario the minister explained is that petrol subsidy will remain up to mid-2023 based on the 18-month extension announced early 2021, in which case only N3.36 trillion will be provided for.
The Minister cautioned that both scenarios have implications for net accretion to the Federation Account and projected deficit levels.
Zainab Ahmed noted that there will be tighter enforcement of the performance management framework for Government Owned Enterprises (GOEs) that will significantly increase operating surplus/dividend remittances in 2023.
In her presentation of 2023-2035 Medium Term Expenditure Framework & Fiscal Strategy Paper (MTEF&FSP) in Abuja, Minister of Finance Budget and National Planning, Mrs Zainab Ahmed noted that the subsidy will be funded by the Nigerian National Petroleum Limited (NNPL) on behalf of the federation.
Meanwhile, the proposed estimate is higher than N4.19 trillion provided for as fuel subsidy in 2022 and the 2023 -2035 MTEF & FSP projections deviate from the projections in the National Development Plan (NDP) 2021-2025.
In the MTEF, real GDP growth it is projected at 3.75 per cent in 2023, from a revised projection of 3.55 per cent for 2022. Growth, according to her, is expected to moderate to 3.30 per cent in 2024 before picking up to 3.46 per cent in 2025 while
inflation rate is projected to average 17.16 per cent 2023, up from the revised average of 16.11 per cent for
2022; Upward pressure on prices is expected to be driven by the current effect of the global price surge due to the Russian-Ukraine war, domestic insecurity, rising costs of imports, exchange rate
depreciation, as well as other supply-side constraints.
The minister who spoke to a gathering yesterday comprising media representatives, members from Civil Society organizations and other stakeholders, explained that the provision for fuel subsidy next year is tied to two prevailing scenarios.
Giving an overview of oil & gas revenues and federally funded upstream project costs (2023 – 2025), the Minister elucidated on two scenarios that would warrant making provision for fuels subsidy next year.
“The projected fiscal outcomes in the medium term are presented under two scenarios based on the underlying budget parameters/assumptions, as follows: Scenario one – the Business-as-Usual scenario: This assumes that the subsidy on PMS, estimated at N6.72 trillion for full year 2023, will remain and be fully provided for. Scenario two – the reform scenario: This assumes that petrol subsidy will remain up to mid-2023 based on the 18-month extension announced early 2021, in which case only N3.36 trillion will be provided for. Additionally, there will be tighter enforcement of the performance management framework for government-owned enterprised (GOEs) that will significantly increase operating surplus/dividend remittances in 2023”, she explained, adding that, both scenarios have implications for net accretion to the Federation Account and projected deficit levels.
However, in her presentation she noted that the government, in the MTEF&FSP also, proposed two aggregate expenditures for 2023 fiscal year which the Minister tied to two scenarios.
“In this scenario, given the severely constrained fiscal space, it is not feasible to
make any provision for MDAs’ capital expenditure in 2023 beyond multilateral/bilateral loan-funded and donor- funded projects. The FGN’s 2023 aggregate expenditure is estimated at N16.98 trillion, which is N337.05 billion (1.9 per cent) lower than the 2022 budget. The sums of N20.29
trillion and N22.73 trillion are projected to be spent by the FGN in 2024 and 2025,
respectively”.
“In the second scenario, federal government 2023 aggregate expenditure is estimated at N17.99 trillion, N669.82 billion (3.9 per cent) higher than 2022. (Inclusive of GOEs). The sums of N20.29 trillion and N22.73 trillion are projected to be spent by the FGN in 2024 and 2025, respectively”, Minister explained.
Fielding questions on the status of new NNPLC in terms of remittance to the federation account, the Minister said the oil firm will not be remitting to federation coffers as was the old practice. However, she said it will pay taxes, royalties and dividends to the federation like every other business.
