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Monthly N250bn subsidy robs Nigeria of N3trn revenue annually from NNPC Ltd, says Finance Minister

…subsidy unsustainable, to be removed in 2022

Mrs Zainab Ahmed

 

The Nigerian National Petroleum Company Ltd (NNPC Ltd) is incapacitated to remit about N3 trillion yearly into the Federation Account because of the N250 billion monthly petroleum subsidy, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has said.

“If you take N250 billion times 12 months, that is about N3 trillion. If we don’t remove that, that is what it is costing us. This money from the petroleum subsidies we can use to apply to health and to education.

“So for the petroleum subsidy, if we look at a cost of about 250 billion per month, and it has been increasing consistently. So we are expecting something around N120 billion per month from NNPC. And now we are getting to a point where NNPC is remitting near zero.

“If we don’t stop we will get to a point where they will tell you to pay me this for managing the fuel provision in the country,’’ she told State House correspondents after Wednesday’s Federal Executive Council (FEC) meeting.

Persecondnews reports that the meeting was presided over by President Muhammadu Buhari at the Presidential Villa, Abuja.

Before the FEC meeting, President Buhari had led cabinet members to wish the Chief of Staff, Prof. Ibrahim Agboola Gambari, a happy 77th birthday.

Congratulating him on the attainment of age 77, Buhari said: “You are still going strong, congratulations!’’

Gambari was appointed about 20 months ago following the death of the former Chief of Staff, Abba Kyari.

According to Ahmed, asides the petroleum subsidy, the Petroleum Industry Act (PIA) has a provision that all petroleum products must be deregulated.

She explained: “In the 2020 budget we made a provision to assume that at the maximum by the end of June, we must exit petroleum subsidy. So this last FAAC the subsidy cost to the Federation was N243 billion.

“The intervention we want to provide is for between 30 to 40 million people and there is still a lot of work going on. We have a committee that is chaired by His Excellency, the Vice-President, state governors and a few of us ministers as members. So we have to have a landing as to the exact number between 20 to 40 million.

“We already agreed it will be N5000 and we have also agreed that the remittances have to be done digitally. So the e-Naira will help, but also so are the various payment platforms that are currently available. What we will not do is paying people in cash.

“So the transfers that people will receive through one kind of electronic money or the other and it is meant to be for a period of six, nine or 12 months.

“So these are things that we are still in negotiation because it’s still money that would have to come from the Federation account. So everybody that is a member of FAAC will have to agree on the numbers. The maximum will be 12 months, the minimum will be will be six months.”

The minister, however, justified the replacement of petroleum subsidy by 2022 with N5000 monthly transportation grant to the “poorest Nigerians’’.

On economic growth, she said the impact of the growth being recorded will not be felt until it surpassed population growth rate, affirming that the third quarter GDP report for 2021 result shows an improvement from the contraction that was witnessed in 2020.

On why the growth has not impacted on Nigerians, Ahmed said: “Let me say that, again, the Nigeria economy is growing. And right now we witnessed, four consecutive quarters of GDP growth. We also said that we aspire to continue to push this growth to the point where the growth supersedes the growth in our population because that is the time that people will actually feel the benefits.

“We are pushing the bar at the third quarter of 2021. The average annual growth is now 3.3%. Our population growth is roughly about 3.2%. So, we still need to do a lot more for people to feel this.

“But the fact that the service sector is not in positive territory also means that people will actually begin to feel the difference because it is the service sector that has the first direct impact on people.”

The minister added: “We entered into a recession technically and then exited recession by the fourth quarter of 2020.

“This report shows that we now have four consistent quarters of growth from Q4 2020 to Q3 2021. The GDP third quarter report shows a growth of 4.03% in the third quarter 2021 compared to a contraction of minus 3.62% in the third quarter of last year.

“Part of the economic activities that were the major drivers of growth within this reporting period is services which grew by 8.41%. Growth in the service sector was largely driven by better performance in the rail transport sector, pipeline sector, air transport, financial institutions, road transport sector, water transport as well as crude.

“Agriculture also grew by 1.22%. This is a slight dip compared to the 1.3% in the second quarter of 2021. And the reason for the dip has to do with a slight slowdown in agricultural activities in some parts of the country due to security.

“The growth in agriculture that is reported in this quarter is largely driven by crop production. The growth in industry has been consistent, but we have seen a slight slowdown compared to the last quarter 2021 and the contraction of the industry is driven by the poor performance of the crude oil and natural gas sectors, coal mining, quarrying, minerals as well as oil refinery.

“The Q3 GDP report indicates that the oil sector’s contribution to the GDP today stands at 7.49% while the non-oil sector contribution to the GDP stands at 2.51%. This indicates that the Nigerian economy is truly very diversified with the oil sector contributing just 7.49%.

“So factors that are responsible for this growth include the commitment of the government to continued containment of the COVID-19 pandemic, as well as the implementation of fiscal and monetary measures to support businesses contained in the Economic Sustainability Plan.

“It includes the improvement that we have witnessed in the rail transport sector, pipelines, air transport, road transport, as well as water transport. It includes improvement in the transportation and the free movement of people as well as goods as the containment measures have really improved.

“We have seen also improvement in the financial services sector with higher supplementary incomes compared to 2020. There is been improvement in electricity generation and distribution during this quarter as well as improvement in water supply, sewage and waste management, and remediation activities.

“There is also an indication of higher trade activities which have significantly improved compared to 2020 because of the containment measures that slowed down trade significantly. Also reported is the inflation numbers for the month of October 2021 at 15.99%.

“This is consistent with the decline that we have seen in inflation from April 2021 to date. We expect this decline to continue through the rest of the year and also throughout the year 2022.

“On the other hand, we have seen an adjustment that has been done in the inflation largely caused by the improvement in the food basket in the inflation mix. And this is largely due to the agricultural harvest which constitutes 50% of the basket and inflation.”

Also addressing the media briefing, the Minister of Transportation, Mr Rotimi Amaechi, said approval was given for the award of contract for the provision of training logistics, operational equipment and maintenance support for government, equipment and personnel under the Integrated National Surveillance and Waterways Protection Solution Infrastructure in Nigeria.

“This is also what we call the Deep Blue Project. That is the project that the president launched some months ago (May or June). The contract was awarded at N6,347,967,644.21 inclusive of 7.5% VAT for a period of two years.

“The cabinet was briefed that there is a huge improvement in the security on our waterways now and we hope that it will continue as we progress,’’ he said.

 

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Written by Per Second News

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