Increase and decline in subsidies

NEITI added that subsidy payments more than doubled in 2008 and 2010 and witnessed the highest increase ever in 2011 to $13.52 billion (N2.11 trillion), citing a sharp decline was witnessed in the years 2012, 2013, 2014 and 2015 when it dropped to $3.34 billion (N654 billion) in 2012.

They also noted a decline in subsidy expenditure continued in 2016 and 2017 to as low as $473 million dollars (N154 billion) in 2017.

“The reduction was short-lived as the payments skyrocketed to over $3.88 billion (N1.19 trillion) in 2018 and 2021 to $3.58 billion (N1.43 trillion).
“By these figures, Nigeria expended an average of N805.7 billion annually, N67.1 billion monthly or N2.2 billion daily,” she said.

Comparisons

NEITI says this also showed that the amount expended on subsidies from 2005 to 2021 was equivalent to the entire budget for health, education, agriculture, and defence in the last five years, adding that the sum equals the capital expenditure for 10 years between 2011 to 2020.

“NEITI ‘s persistent calls for the removal of petroleum subsidies were informed by the fact that the ways of funding the expenditure over these years relied more on federation accounts funds, the Federal Government, and sometimes from external borrowing with negative consequences on government overall revenue profiles.

“NEITI was also concerned that the consequences of funding subsidies have resulted in poor development of the downstream sector, declining GDP growth, rise in product theft, pipeline vandalism, environmental pollution, and undue pressure on foreign exchange.
“Other challenges imposed on the economy were naira depreciation, low employment generation, the declining balance of payments and worsening national debt.”

QGist:
The removal of fuel subsidies can be beneficial from an economic perspective, particularly if the funds saved from the subsidy removal are allocated to other pressing matters that promote income generation and economic growth. Fuel subsidies are a form of government intervention in the energy market, where the government provides financial assistance to keep fuel prices artificially low for consumers.

While fuel subsidies may seem beneficial in the short term by reducing the cost of living for citizens, they have several economic drawbacks in the long run:

1. Fiscal burden: Fuel subsidies can place a significant strain on a country's budget and fiscal resources. Subsidies require a substantial allocation of funds, which could be utilized for other important sectors such as infrastructure, education, and healthcare.

2. Market distortion: Subsidies lead to an artificial increase in demand for fuel, potentially causing overconsumption and inefficiencies in the market. This distorts price signals and may result in misallocation of resources.

3. Opportunity cost: The funds used for subsidies could have been invested in more productive sectors of the economy, such as research and development, technology, or entrepreneurship. These investments have the potential to create new income-generating opportunities and foster economic growth.

To fully capture the economic benefits of removing fuel subsidies, it is essential that the saved funds are redirected to other initiatives that foster income generation and enhance overall economic productivity. For instance:

1. Infrastructure development: Investment in infrastructure, such as roads, bridges, and public transportation, can improve the efficiency of movement of goods and people, reducing production costs and boosting economic activity.

2. Education and skill development: A well-educated and skilled workforce is crucial for attracting investment and creating a competitive advantage in the global market. Allocating funds to education and vocational training can enhance human capital and promote income-generating opportunities.

3. Small and medium-sized enterprises (SMEs) support: Providing financial assistance, training, and access to markets for SMEs can stimulate entrepreneurship and job creation, leading to increased income levels.

4. Research and innovation: Allocating funds to research and innovation can spur technological advancements and increase productivity in various industries, leading to economic growth and higher income.

In summary, removing fuel subsidies can be economically advantageous if the saved funds are wisely allocated to other critical areas that enhance income generation, productivity, and overall economic development. It requires a well-thought-out strategy and prudent fiscal management to maximize the positive impact on the country's economy.

NEITI also underlined the importance of unveiling the implementation of people-oriented welfare programmes to provide relief for the poor and vulnerable and advised priority attention to be paid to the rehabilitation of the nation’s four refineries currently ongoing.

On other policy considerations, they urged the government should commission a special report on actual PMS consumption in Nigeria, enforce stringent sanctions for criminal activities in the sector and conduct appropriate stakeholders’ consultations, engagements, and enlightenment.

advanceDNA:
U are still on subsidy...?? U these paid agents.?

Ur irresponsible goverment is telling nigerians to use bicycle..while they drive 200 million bullet proof benz and lexus.....

Its only a matter of time...the nigerians u have blinded with ur subsidy excuse will soon see through ur smoke screen..

nairalanda1:





Yes, and to tell you the truth, their actions piss me off. Seriously. But then, a croccodile is always a crocodile, never a lamb.

Yeah,most of you guys don't believe me. For me it does not matter. I come, I post my opinion, I go. Whehter 90% or 10% of nairalanders believe me is of no importance.

Good am.

advanceDNA:


U lies are very obvious...
If someone pisses u off...u will critisize them..
But no...all u post is explaining on their behalf why they cant do anything with the countries revenue/taxes....

They've removed subsidy...why still so much noise on what subsidy payment has hindered..

The noise should be what money meant for subsidy should do for nigerians...but no.. ur goverment went further to remove education subsidy....like wtf....which goverment accross the world removes education subsidy..??

All ur noise is that pple must keep suffering while u justify their incompetence and corruption with flimsy, dirty excuses...

ican2020:
“ particularly if the funds saved from the subsidy removal are allocated to other pressing matters that promote income generation and economic growth”

If has already come to stay with us since 1999 when this democracy began

Obasanjo increased fuel prices and the word if was used by people like you trying to support and justify the increase but zero or nothing was done to fix the poor infrastructure and many other government’s followed the same path and people like you are always available to use if they will use but nothing is ever done

When Tinubu is done, you and others will realize that the if you thought about was only a dream cause the saved money has already ended in private pockets

The cycle continues with a new government I rest my case

nairalanda1:



Okay, so much electrons spilled in one day.

Good morning. Take a break from Nairaland. It is affecting you seriously.

advanceDNA:


Baba..no need to gaslight me because i dey tell u truth..

.we are all nigerians but when pple like u keep creating excuses for bad leaders becos of peanuts u collect... this country will never be great...

nairalanda1:


Still spilling electrons.

Also your support for subsidy means you must have backed Tinubu and Buhari in 2012, then. Well, I woke up in 2012, saw the wrong they were doing in the name of politics, and supported subsidy removal, despite the fact that I was not a supporter of any politheifian.

Anyway, take a break from Nairaland. It is affecting you too much.

advanceDNA:


Subsidy is not ur problem....u people just demonize subsidy like it's an evil......subsidy is a common practice all over the world......it is how a govermentt give back to the people through healthcare, education, common commodity that everyone uses...

. corruption is why ur goverment cant subsidize goods and services for its people.......its the reason why we wont see the benefits of oil subsidy removal.....its so bad ..that goverment secondary school now pay huge money

Its the reason we have thieves that have spent 8 years in executive seats, receiving pensions and ridiculous allowances yet serving currently as senators and receiving double....

Its the reason non needed projects are done to steal billions...

Corruption is why we keep blaming oil theft for why hospitals and schools are not running well...yet leaders drive 200millionaira bullet prrof cars, and receive crazy allowances

See ...keep giving ur leaders excuses.. u will soon realize the peanut they are paying you is not enough for ur lies and the suffering u and ur family will meet ahead

nairalanda1:



Yeah, subsidy is not the problem, it is, ultimately, our overreliance on one source of income, corruption and stealing.

Also, if subsidy is not the problem, why are you then angry about my comments on subsidy?



And good luck.

advanceDNA:


Angry?? U are not even a patroitic nigerian if u are not angry about the situation of this nation....The money they are paying u has blinded u from seeing clearly...all u see is opposition....thats how i know u are a paid agent because anybody u see complaining about evil in his nation to you must be a pdp member..... so na only pdp member dey this country? U think all of us are politicians??
See how blinded u are... so party member are the only people in this nation...??

they have removed subsidy....why are still shouting about subsidy that has been removed?? Shouldnt we be talking about the things subsidy money should be doing for nigerians in the education, health and other sector.... shouldnt the government start clamping down on bogus contracts used to steal money.... ?? All u do is talk about subsidy and how masses should keep quiet and suffer while ur oppressors drive 200million naira bullet proof cars... shame on u..