Fuel Subsidy, Debts Servicing Hurting Nigeria’s Economy, Finance Minister Cries Out
The continued payment of fuel subsidy and servicing of external debts have become big burden to the economy, the Finance, Budget and National Planning Minister, Mrs. Zainab Ahmed cried out on Tuesday.
Ahmed said the policy of paying fuel subsidy to oil marketers has made it difficult to service the nation’s debts.
The Minister spoke in Abuja during the launch of the World Bank’s Nigeria Development Update titled: “The Urgency for Business Unusual.’
According to her, the current situation was that fuel subsidy payment has become a big fiscal burden, adding that it was wasteful for government to borrow for consumption.
She lamented, “This premium motor spirit (PMS) subsidy is costing us an additional N4 trillion than was originally planned. So, this is an unplanned deficit. We have gone to the National Assembly; we have gotten approvals, but the approval was simply for us to cut down on some of the investment costs. “So, investments that we needed to make in oil and gas sector which we are delaying and deferring to a later time and reducing the rollout of those investments. But we also had asked that we needed to borrow more which is very serious.
“Already we have borrowing increasing significantly and we are struggling with being able to service debt because even though revenue is increasing, the expenditure has been increasing at a much higher rate so it is a very difficult situation.
“So Nigerians need to understand that this PMS subsidy we are carrying now is hurting the nation, its impeding the government’s ability to be able to invest in human capital development. N4.5 trillion is money that we could have invested in health or education.
“But where we are investing it in consumption, which is very wasteful, because how many Nigerians own cars that are benefiting from this subsidy.”
The Anambra state Governor and former Central Bank Governor, Prof Charles Soludo who attended the event called on the government to begin to phase out subsidy payment immediately.
According to Soludo, “We have had this analysis over and over and so the diagnosis is clear. We know this problem, we know that Nigeria is grappling with several unsustainables, be it in the area of security or in the area of macroeconomic framework and subsidies that nobody gets. We subsidise those who own cars but have no money to build the roads for them to drive on.
“In May, States received zero from the federation account coming from oil and we’ve reached the end and there is only one way. That is the federal government decides that it wants to subsidise PMS. Why do you have to charge it to the sub-nationals? They should charge it on the revenue of the federal government and not charge on the federation.
“The solutions are pretty obvious, just get them off, and remove this subsidy like yesterday.
“If we continue with subsidy, central bank would continue to print money, the deficit will continue to rise and how does the federal government pay its bills? It has got to resort to ways and means and the ways and means continue to fuel inflation and the depreciation of the exchange rate.”
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