The federal government has explained that the current subsidy regime on petroleum motor spirit (PMS), which is covered under the ‘Cost Recovery’ mechanism of the Nigerian National Petroleum Corporation (NNPC) would end in the first half of 2022.
The Director General of the Budget Office of the Federation (BoF), Mr. Ben Akabueze, disclosed this in Abuja yesterday during an interactive session with journalists, civil society organisations and other stakeholders on the 2022 budget proposals.
Akabueze explained that fuel subsidy exerts enormous strain on government finances and does not benefit the poor for which they are targeted, adding that the elite enjoy 80 per cent of subsidy.
The DG Budget stated that the revised 2022-24 Medium Term Expenditure Framework (MTEF) was premised on a hybrid of January-June which is anchored on the current fiscal regime with provision for cost recovery by the state oil company, as well as July-December based on the Petroleum Industry Act (PIA) fiscal regime.
According to him, by the second half of 2022, the NNPC would transit fully and operate as a full commercial entity funding its operations and maximising its gross revenues.
Akabueze, who spoke extensively on the proposed N16.39 trillion budget, noted that 34.8 per cent of projected revenues is to come from oil-related sources while 65.2 per cent is to be earned from non-oil sources.
He pointed out that the combined expenditure of the federal, state and local governments was less than 15 per cent of Gross Domestic Product (GDP).
According to him, the biggest challenge stems from low revenue, lamenting that about 40 million of the 70 million Nigerians who should be in the tax pool were not paying taxes.
He said, “It is absolutely critical that we fix our revenue challenge because oftentimes people just say cut expenditure. The truth is cutting expenditure is not currently a viable option for two main reasons. Number one, our public expenditure to GDP ratio is about the lowest even on the continent of Africa.
“As a country, our public expenditure to GDP ratio is under 15 per cent. Even on the continent of Africa, that ratio, the average is over 30 per cent. The global average is over 30 per cent. I am talking of the whole of government – federal, state and local governments. The reality is that in aggregate, governments in Nigeria are not spending too much, they are actually spending too little.
“So, the solution is not to cut government spending. The solution is to make government spending more efficient and actually increase the scope for the government to be able to spend more because our public expenditure to GDP is so low. That is why the delivery of public goods and services is weak.”
Akabueze argued that there is correlation between low public expenditure to GDP ratio and low revenue to GDP ratio.
He further stated that the government’s revenue to GDP was also among the lowest in Africa.
Akabueze observed that many stakeholders had advocated a cut in personnel cost which currently stands at about N4.1 trillion to address revenue challenges, arguing that doing so was not an option.
This, he noted, is because public sector wages are already low compared to the private sector.
On the implementation of the Stephen Oronsaye Report which recommended the scrapping of some government agencies to save cost, Akabueze said the government was still considering the option, adding that another committee had been set up to look into it.
On the alleged duplication of some projects in the FGN 2022 budget proposal, he stated that a review of the claims in some quarters indicated that most, if not all the projects are not duplications.
He added: “For instance, two projects with the same narration and located in the same geo-political zone are not necessarily the same. They may be in different states, local government areas or communities.
“However, errors (including duplications, if any) in the budget, which must be within a reasonable margin of error, are corrected during the enactment process,” he said.
Also dispelling allegations of opacity in the composition of Statutory Transfers, and that they are stated as lump sum provisions without details especially the budget of the National Assembly, Akabueze said it was important to note that Nigeria is a constitutional democracy.
“The budget details presented to the National Assembly are those of the executive arm of the federal government. We can only encourage other arms of government to publish their budget details for public scrutiny. We believe the public deserves to have these details, and will support your advocacy in this regard.
“Indeed, the Budget Office of the Federation has implemented several reforms to deepen citizens’ participation, transparency and access to budget information.”