The stubborn undercoverage of Premium Motor Spirit (PMS), also known as the gasoline subsidy, created a mess of income for the federation in 2021.
Apart from the usual polemics on the question of whether to “withdraw or not”, the essence subsidy payments swallowed up over 1.03 trillion naira in 10 months, resulting in low revenues for federal, state and local governments to respond to development projects.
This figure is higher than the proposed budget for Nigeria’s health sector in 2022 at N711.2 billion.
In April and October 2021, the Nigerian National Petroleum Corporation (NNPC) recorded no oil export revenue due to excessive subsidy requests.
TheCable examines how the gasoline subsidy payment affected the country’s income in 2021.
HIGHER OIL PRICES, LOW IMPACT ON THE COUNTRY
Oil prices fared better in 2021 – reaching a low three year high. Last year, prices hit a low due to the impact of the COVID-19 pandemic and lockdowns, which rocked the global oil market.
From $ 11 per barrel in 2020 to over $ 80 per barrel in 2021, the rise in global crude oil prices should portend a recovery in the Nigerian economy as it implies more oil revenues for the government.
But this has not been the case with demands for subsidies eroding oil revenue gains.
President Muhammadu Buhari chairs a meeting of the federal executive.
Throughout 2021, the federal government filled the shortfall to ensure that citizens buy the product below actual value. Since there was no provision for the payment of subsidies in the 2021 budget, the Nigerian National Petroleum Corporation (NNPC) decided to transfer them directly from the remittance of revenues to the Allocation Committee of Accounts of the federation (FAAC).
This is partly due to the lack of functional and optimal refineries, which has forced the country to spend part of its income by subsidizing refined products for the citizens.
Simply put, with a higher oil price comes an increase in the cost of landing gasoline – meaning that an increase in the world price of oil means the government will continue to pay more to subsidize the gasoline. product for local consumers – questionable citizens.
Mele Kyari, NNPC GMDDISTRIBUTION OF REDUCED REVENUES
Despite projected 2.09 trillion naira in revenue payments to FAAC between January and October 2021, the state oil company has failed handed over a measly 511.66 billion naira during the period, which resulted in a shortfall of 1.58 trillion naira.
Due to the shortfall, the FAAC had to forgo much of the oil sector’s revenue – an integral source of revenue for an oil-dependent nation.
In April, the company said it do not postpone any amount of oil and gas revenue to the FAAC in May due to pressure from oil subsidy funding, thereby reducing the distribution of revenue to the three levels of government during the month.
In the same month, Godwin Obaseki, Governor of Edo State, accused the Central Bank of Nigeria (CBN) of printing N60 billion to increase the March allowance.
Federal government and Central Bank of Nigeria (CBN) fired Obaseki’s assertion.
In October, President Muhammadu Buhari declared that federal government spending on grants affected the revenue that should have been used to finance the 2021 budget.
But what should Nigerians expect in 2022?
In a new move, the federal government is considering replacing the oil subsidy with N5000 for the poorest Nigerians.