https://thestreetjournal.org/fg-borrowing-funds-to-import-fuel-34bn-external-reserves-enough-to-withstand-global-recession-finance-minister-zainab-ahmed/

The federal government, on Tuesday, January 17, said that it borrows funds to buy fuel into the country.

The minister of finance, budget and national planning, Zainab Ahmed, made this known on Tuesday, according to The Punch.

Ahmed confirmed that there was a possibility of global economic recession this year, but stressed that the nation’s foreign reserves were healthy enough to withstand the shocks.

The minister also stated that the federal government, at some point, had to borrow funds to buy Premium Motor Spirit (PMS), popularly called petrol, despite the huge subsidy spending on the commodity.

Ahmed insisted on ending the fuel subsidy policy this year, adding that it would be done gradually from the second quarter of this year.

The minister said that, “We have to exit fuel subsidy, because that is also a very significant contributory factor.

“You can look at it in two ways; it is revenue that would have come to the government but it doesn’t because it has been spent on fuel subsidy.

“Also, where there is nothing for the government to buy the refined petroleum products, we have to borrow to buy the petroleum products.

“So if you take that out, that’s about N3.25 trillion, and that is a significant relief,” she added.

Ahmed, while explaining why the fuel subsidy was not removed in June 2022 despite the plan of the government to halt it at the time, said that it was a decision that was taken by the federal government due to the lingering impact of the COVID-19 pandemic and heightened inflation.

“Removal of fuel subsidy at that time would have increased the burden on the citizens, and the president does not want to contemplate a situation where measures are taken that further burdens the citizenry,” she said.

“So the decision was to extend the period from June 2022 to 18 months, beginning from January 2022.

“So in June 2023, we should be able to exit. The good thing is that we hear a consistent message that everybody is saying this thing needs to go and that it is not serving the majority of Nigerians.

“I listened to some of the new leaders campaigning for the next round of leadership in the country and they are saying that they will get rid of it very quickly,” Ahmed added.

She further stated that the ambitious N10 trillion revenue target of the federal government, as projected in the 2023 budget, would be met, based on various measures that had been put in place.

The minister, while commenting on the possibility of a global economic recession, said that, “Clearly there is going to be a decline in growth, and why we are having this decline in growth is because of the sustained economic impact of the COVID-19 pandemic.

“We’ve seen the resurgence of COVID-19 in some developed economies, especially China, and also the effect of the Russia-Ukraine war that is having a global impact.

“The quantitative easing that is being implemented by central banks across the world also contributes to the high cost of interest, resulting in the high inflation rate, and this means that people’s spending power is weakened.

“So these are all indications that there will be a global recession,” Ahmed added.

The minister also noted that the country would be able to withstand another recession this year, going by its current reserves.

She said that, “It is true that our reserves was $60 billion during the first global recession. Our reserves are now down to $34 billion, and that is still a healthy level.

“It means that we will be able to meet at least six months of imports and other expenses into the country.

“It means that we can withstand another global shock if we are able to carry through a coordinated response between the monetary, fiscal as well as trade authorities.

“We have learnt a lot from the experience that we went through during the COVID-19 period, and it shows that when we plan well, we can actually withstand the shocks.

“You’ll recall that Nigeria’s economy did go into recession during the COVID-19 period because of that coordinated response, which had not just government, but also the private sector contributing to the effort.

“Also, at that time we were able to scale back on some categories of government spending to enable us to invest more in the healthcare sector.

“So with the right policies, we can weather another global recession,” Ahmed added.

The minister, while reacting to concerns that the federal government’s revenue projection of over N10 trillion for 2023 was too optimistic, stated that a lot of measures were on the ground to realise this target.

She said that, “I will say that if you look at the numbers, the performance of the 2022 budget, you will see that the oil and gas sector contribution was about 35 percent, while the non-oil sector had the largest contribution.

“But not only that, the non-oil sector contribution outperformed the budget by a very large proportion, for example, Company Income Tax outperformed the budget by 158 percent.

“So there are some foundational measures that have been taken which enabled the non-oil sector revenue to grow on a consistent basis, and not just by a little number, but a quite significant number.”

Ahmed further pointed out that the oil sector’s contribution which was minimal in 2022 was looking good to pick up in 2023.

She said that, “The measures that the government has taken, a combined effort of security and intelligence agencies’ work, have resulted in improving production in the oil and gas sector, and it looks like it would continue.

“Most of the fields that were previously not producing at the levels that they were supposed to produce, can now produce at maximum capacity.

“Also, oil price in the international market is still at a very reasonably high level.

“We are also doing a lot to encourage investments in gas, so as to get incremental streams of income that will come from that sector.

“We’ve also introduced some new excise duties and some taxes, the full effect of which we will see this year,” Ahmed added.

Yet someone wants to continue from where buhari stopped