The CBN Governor insists subsidy funds will run out
soon
By Soundcity Admin
Apr 20, 2012 - 1:59pm WAT
The N656.3bn allocation made for fuel subsidy in the
2012 budget will run out before the end of the year,
the Governor, Central Bank of Nigeria, Mr. Lamido
Sanusi, has said.
In addition to the N656.3bn allocation for this year,
the Federal Government had also provided N231.8bn
in the budget for the payment of the 2011 subsidy
arrears, adding up to N888.1bn.
“With oil prices where they’ve been since the
beginning of the year, I’m sure that we will be
exposed to that amount long before the year runs
out,” Sanusi told the Reuters Africa Investment
Summit in Abuja on Thursday.
“If I was asked for advice, I’d simply say pay what
you have in the budget and simply stop paying. If
not, take the money from the Excess Crude Account
or you’ve got to borrow money,” he added.
Although the pump price of petrol is currently N97
per litre, the landing cost of a litre of imported petrol
is N152.44, leaving the government to pay about
N55.44 on every litre of petrol as subsidy.
When the N55.44 per litre is multiplied by a daily
consumption of 35 million litres, it amounts to a daily
subsidy expenditure of N1.94bn. The figure adds up
to N60.14bn monthly.
The country is supposed to save money over a
benchmark price, which is $72 a barrel in the 2012
budget, into an excess crude account to cushion the
economy against potential oil price shocks.
But the account has been repeatedly raided by
politicians, and despite record high oil prices, it
contained only $3.5bn earlier this year, down from
some $20bn in 2007. It won’t last long if subsidy
payments overshoot.
The country’s total debt is about 20 per cent of Gross
Domestic Product, which is comfortable compared
with other African countries, but, Sanusi argues it is
poor for a country pumping as much oil as Nigeria.
Debts are rising despite high oil revenue and
economists are concerned that borrowing is
increasingly internal, which means from banks and
pension funds. If the government fails to pay, then
other parts of the economy are at risk
The nation relies on crude exports for more than 80
per cent of government revenues and budgets for
this amount based on the benchmark oil price and
assumed production, which was set at 2.48 million
barrels per day this year.
This is at the top-end of actual production last year
and if there are any output shortfalls, which have
been common in the past, the government will have
to borrow to cover any shortfall.
Sanusi said, “(The output) assumption was too
optimistic … based on the most rosy forecasts of
operating environment.
“When you’ve got militancy, you’ve got production
shortages, you’ve got natural operational failures, a
more conservative output figure to begin with would
have been better.”
High oil prices have enabled the economy to grow at
more than seven per cent a year but poverty is rising.
President Goodluck Jonathan pledged before his
election last year to improve the country’s woeful
electricity system by privatising the power sector
and to reform the oil sector so as to weed out
corruption and save the indebted Nigerian National
Petroleum Corporation.
The ambitious Petroleum Industry Bill, which is
supposed to change everything from taxes to the
structure of the NNPC, has been stuck in
parliamentary dispute for years.
Reforms are running months behind schedule and
risk being blocked off by politicians who benefit from
the status quo.
“Clearly, we should have made much more progress
than we’ve made. The PIB is a major disappointment
… after several years (it) is about to start again its
tortuous path through the National Assembly. In
many of these areas, you’ve clearly got vested
interests,” Sanusi said.
culled from www.punchng.com