Amidst economic hardship and rising expenditure, the federal government plans to tap €2 billion ($2.2 billion) this month or next of the money it raised through Eurobond sale last year and target more local borrowing in 2022 to help fund its costly petrol subsidies as oil prices rise, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed has revealed.
She told Reuters that the country would not tap the Eurobond market this year.
“Rising oil prices has put us in a very precarious position… because we import refined products… and it means that our subsidy cost is really increasing,” she said on the sidelines of an Arab-African conference in Cairo.
Recall that the federal government in January reversed a plan to end fuel subsidy by the middle of this year, and instead extended them by 18 months to avert any protests in the run-up to presidential elections next year.
But the price of oil soared recently, but the price of Brent crude, the global benchmark for prices dropped below $100 a barrel for the first time since March, yesterday.
The West African country depends almost entirely on imports to meet its domestic gasoline needs, even though it is a crude oil exporter.
It is also facing shortages after taking delivery of some unusable substandard gasoline.
President Muhammadu Buhari in a letter to parliament in February had requested for extra funds to pay for petrol subsidies and with that the country’s budget deficit was expected to be four per cent of the country’s Gross Domestic Product (GDP) as the government eyes new domestic borrowing.
The deficit was originally set at 3.42 per cent of GDP. Petrol subsidies cost Nigeria up to $7 billion a year in revenue.
Ahmed said the government was working with lawmakers to boost revenues and that the rise in oil prices means that borrowings will increase more than planned.
She had lamented that the rise in crude oil price had further widened the country’s budget deficit, pointing out that the federal government was presently in the process of amending the budget to accommodate fuel subsidy.
Ahmed had explained, “We are cleaning up our subsidies; we had a setback as we were to remove subsidy by July this year, but there was a lot of pushbacks. We have elections coming and also because of the hardship that companies and citizens faced due to the COVID and we were told that the timing was not right, so we pulled back.
“But we have been able to quietly implement subsidy in the electricity sector and as it is, as we speak, we don’t have subsidies in the electricity sector.
“Fuel subsidy is a huge problem for us. It has thrown up our deficit much higher than we planned. What is happening to the global oil prices is also going to, perhaps, worsen matters. But the current review we are doing is to say we will hold the subsidy at the level in which it is planned.”
Speaking on how much global prices would affect subsidy payment, Ahmed had said, “We are currently doing a budgetary amendment to accommodate the incremental subsidy as a result of the reversed decision and we want to cap it at that.
“Hopefully, the parliament will agree with us and also at least contain the subsidies; otherwise, the way things are going now, we will not be able to predict where the deficit will be as a result of the fluctuation in the global markets.”
