The Federal Government has said it’s estimated cost for fuel subsidy will reach and all time high of N6.7trn in 2023, more than N2trn increase from what it is currently paying.

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed issued the warning on Thursday in Abuja during a consultative forum on the 2023-2025 Medium Term Fiscal Framework.

Ahmed who expressed worries that the fuel subsidy regime was hurting Nigeria’s ability to service its debts and meet up with capital expenditure, called on Nigerians to understand that retention of fuel subsidy was affecting operations, adding that the federal government borrowing for consumption was wasteful.

She said as the 2023 budget process commences, the federal government is faced with two scenarios of either to retain the subsidy payment throughout 2023 which would gulp N6.72trn or retain it till the end of June, 2023 based on the 18 months extension announced in early July of last year.

According to her, both scenarios have serious implications for net accruement to the Federation Account and projected deficit levels

“The projected fiscal outcomes in the medium term are presented under two scenarios based on the underlying budget parameters/assumptions, as follows: Scenario 1 – 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 2 – 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 N3.36trn will be provided for. Additionally, there will be tighter enforcement of the performance management framework for GOEs that will significantly increase operating surplus/dividend remittances in 2023. Both scenarios have implications for net accretion to the Federation Account and projected deficit levels.”

The Minister also disclosed that the federal government has so far released the sum of N4.72trn to finance some of the expenditure items contained in the 2022 budget.

Ahmed explained that out of the N4.72trn spending, the goverment released N1.9trn for debt service while personnel costs and pensions gulped the sum of N1.26trn, adding that the balance of N773.63bn was spent by the federal government on capital projects.

Similarly, the Minister of State for Budget and Planning, Prince Clem Agba, said the removal of fuel subsidy lies in the hands of Nigerians.

He said, “PMS being sold at N200 is still a big problem, the cost of production in PMS itself in the neighborhood is about N600 to N700 per liter.

“Right now, Nigeria is the only country in the world that is selling at about N165 or N200. If you call your friends or brothers in the States or in the Europe or in other African countries, you will know that PMS is currently being sold at the range of N800 to N1000 per litre.

“I think that the time to remove subsidy was yesterday, we are only eating away our future, and that is what some people all consumption economy. I find it difficult to understand a situation where citizens say that they want Omelet and when the government wants to bring egg so they can produce Omelet, they say no don’t bring it yet.

Unfortunately, all those who agree with us in house that we should remove subsidy, all the political parties, governors in the country, the labour unions, NLC, or TUC, when they come out in the public, they will say don’t remove the subsidy, but behind the scene they understand that it has to be done.

“But maybe out of lack of patriotism or in other to promote themselves, or their parties they say it’s the government that wants to punish its citizens. But Nigerians really need to decide if we must have a future then subsidy needs to go now.”

In his remarks at the Forum, Akabueze said that Nigeria is currently going through significant fiscal challenges.

Speaking on the challenges, the Director -General of the Budget Office of the Federation, Mr Ben Akabueze said while Nigeria had improved transparency and accountability in the oil sector, more work needed to be done in boosting revenue.

He said, “Our country is going through significant fiscal challenges. As you can see, the challenges are well instituted and well articulated but of course you would really think that we have misdiagnosed the problems.

The Minister further stated that the new NNPC will not be contributing monthly FAAC as it used to be but it is structured to pay royalties, taxes, and dividends. Consequently, NNPC has been instructed to cover the cost of subsidy on behalf of the federation.