SAT 29 JAN, 2022-theGBJournal- The Federal Government has halted its plan to remove fuel subsidies indefinitely following heightened pressures from labour unions amidst considerations ahead of the oncoming 2023 elections.
Specifically, the government disclosed that it would retain petrol subsidy payments for the next 18 months and will now amend the 2022 Appropriation Act to accommodate the new change to provide for subsidy payments from July 1. Accordingly, the Federal Executive Council (FEC) has approved N3.00 trillion for subsidy payment in 2022FY. Given the proposed expenditure of N17.13 trillion in the 2022FY budget, the provision for subsidy translates to 17.5% of the proposed public spending.
Also, the NGN3.00 trillion approved by FEC is 50.3% and 43.4% of the capital component and recurrent expenditure of the 2022FY budget, respectively. With the deficit of NGN6.39 trillion in the approved 2022FY budget, we believe the actual deficit could deviate materially from this amount if we incorporate the provision for subsidy payment.
The preceding lends credence to our view that the government may borrow more than it had initially projected. The decision of the FG did not come as a surprise to us, given the inertia of policymakers in implementing bold reforms, particularly in pre-election years. We believe the commencement of operations at Dangote Refinery may be the ultimate game-changer in liberating the country from the long-standing debate on the deregulation of PMS prices.
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