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President Muhammadu Buhari has asked the House of Representatives to adjust the Medium Term Expenditure Framework (MTEF) to accommodate the projected N4 trillion for petroleum subsidy in 2022.
The president, in a letter read by the Speaker of the House of Representatives, Femi Gbajabiamila, on Thursday, is seeking an increment of $11 to the oil benchmark to accommodate subsidy consumption and other expenses.
According to Mr Buhari, N442.72 billion was earmarked for fuel subsidy in the 2022 budget (January-June), but because of the hike in the price of crude oil, Nigeria is paying more for PMS subsidy, therefore, the country will require an additional N3.557 trillion for subsidy.
The current MTEF contains $62 BPD. If this is approved, the benchmark will now be $73 per barrel.
However, the government is planning to reduce daily production by 283,000 barrels because of the activities of vandals. This means the daily production will be 1.6 million BPD instead of 1.83 million BPD.
Mr Buhari blamed the ongoing Russia-Ukraine war and the activities of the oil vandals for the proposed fiscal adjustments.
“Spikes in the market price of crude oil, aggravated by the Russia-Ukraine war. Significant lower oil volume due principally to production shutdown as a result of massive crude oil theft between production platforms and terminals” are the two main factors responsible for the adjustments.
The federal government had in January suspended the removal of subsidy after the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) threatened to embark on mass protests.
The Minister of Finance, Zainab Ahmed, had announced that the government will spend N3 trillion on subsidies in 2022.
Mr Buhari subsequently sent a supplementary budget to the National Assembly to adjust the 2022 Appropriation Act accordingly.
However, the invasion of Ukraine by Russia and the corresponding sanction by the international community led to an increase in the price of crude oil in the international market.
As a result, the prices of refined products also increased. The landing price of petroleum also increased.
For weeks, there were long queues at filling stations across the country due to shortage in the supply of the products which are largely imported as a result of the bad state of the local refineries.
With this proposed amendment to the MTEF, the government is adjusting the estimate to be spent on subsidies for the second time in 2022.
This post was written by Obiajulu Joel Nwolu.
The views expressed here belong to the author and do not necessarily reflect our views and opinions.