FG may spend extra N624bn on fuel subsidy

The Federal Government is looking for an additional $4bn (N624bn) to fund subsidy on petroleum products this year, a report has said. Although N888bn was earmarked for subsidy in the 2012 budget, N451bn has already been spent on 2011 arrears. A report by the Financial Times report quoted Federal Government officials as saying President Goodluck Jonathan had floated an idea of a supplementary budget worth N624bn to cover the 2012 subsidy. Should the government spend additional sum of N624bn, the subsidy expenditure will balloon to about N1.5tn by the end of the year. On this, the Minister of Finance, Dr. Ngozi Okonjo-Iweala, said the country would be unable to safeguard itself against external shocks if it covered the cost. The report quoted the minister as saying, “We are vulnerable if there is a contagion from Greece. We can afford to keep paying the subsidy but it means we will be very
thin of buffers.” Okonjo-Iweala added that losses from oil theft were taking a huge toll on government finances. However, she vigorously defended the administration’s record in trying to straighten out the mess. A government memo that FT claimed to have seen suggested that maintaining the subsidy would wipe out funds saved up as insurance against a drop in the price of oil, on which the country depended for over 90 per cent of government’s revenue. The memo also called into question the government’s ability to pay the wage bill and meets its obligations to the 36 states of the federation should oil prices fall. The Excess Crude Account has about $4bn in it, according to Okonjo-Iweala. This is equal to the amount being floated by the Presidency to cover the 2012 subsidy. However, the minister said subsidy claims were now being thoroughly checked before payments were made. The two accounting firms auditing the subsidy payments last year had been sacked, she added. Okonjo-Iweala also added that Mckinsey, a management consulting firm, had been brought in to advise the government on how best to plug the loopholes. She had also said that all oil marketers who fraudulently benefitted from subsidy payments would refund all that they had illegally collected. The minister said this while giving a breakdown of the performance of the 2012 budget in Abuja last week. Okonjo-Iweala debunked reports that the Federal Government had suspended the payment of fuel subsidy to oil marketers, saying the need to ensure an effective management of the fuel subsidy regime was responsible for the current staggered payments. The minister, who could not provide the amount that had so far accrued as fuel subsidy from January till date, however, said apart from the N451bn paid as fuel subsidy arrears for last year, an additional N17bn had been released for this year. This implies that of the N888bn subsidy budget for 2012, a total of N468bn had been spent, giving a balance of N420bn.