Amid a projection by the Federal Government to spend a whopping sum of N6.7tn on fuel subsidy next year and a major shortfall in government oil revenue this year, economic and energy experts have predicted tougher days ahead for the economy, states and Nigerians.
The Minister of Finance, Zainad Ahmed, had on Thursday released the four-month fiscal report of the economy during a public consultation on the 2023-2025 Medium Term Expenditure Framework/FSP.
“Crude oil production challenges and PMS subsidy deductions by NNPC constitute significant threat to the achievement of our revenue growth targets, as seen in the 2022 Performance up to April,” Ahmed said.
“Bold, decisive and urgent action is urgently required to address revenue underperformance and expenditure efficiency at national & sub-national levels,” she noted.
Economists and petroleum experts projected that Nigerians, state govts and the economy would experience tougher days ahead going by the numbers.
The gross oil and gas federation revenue for the first four months of 2022 failed to meet the expected target, falling from N3.12 trillion to N1.23 trillion, representing a 39 per cent performance, according to the Overview of 2022 Fiscal Outcomes and Update on 2022 Federation Revenue Performance presented by the finance minister.
Ahmed said the subsidy projection was based on business-as-usual or reform scenarios, noting that the first scenario assumed that subsidy would be retained and fully provided for.
Revenue Falls By N1.89tn, Nigerians Face Tougher Times
The second scenario, she said, assumed that subsidy would remain up till mid-2023 based on the 18-month extension earlier announced, but only N3.36 trillion would be spent.
Both scenarios, however, contained opportunity costs in relation to net accretion to the federation account and deficit, she noted.
She said despite higher oil prices, oil revenue underperformed due to significant oil production shortfalls arising from oil production shut-ins resulting from pipeline vandalism and crude oil theft; and high petrol subsidy cost due to higher landing costs of imported products.
She further said that the amount available for distribution from the Federation Account was N1.52 trillion within the first four months of the year.
Of this amount, she said, the Federal Government received N802.50 billion, while states and local governments got N407.04 billion and N313.81 billion respectively.
“Federal, State and Local governments received N107.67 billion, N358.90 billion and N251.23 billion respectively from the VAT Pool Account.”
She said as of April 2022, FGN’s retained revenue was only N1.63 trillion, 49 per cent of the prorata target of N3.32 trillion.
She said the Customs collections (made up of import duties, excise and fees, as well as federation account special levies) trailed target by N76.77 billion (25.42 per cent).
“In the MTEF, real GDP growth is projected at 3.75% in 2023, from a revised projection of 3.55% for 2022. Growth is expected to moderate to 3.30% in 2024 before picking up to 3.46% in 2025,” she said.
On the other hand, inflation rate is projected to average 17.16 per cent in 2023, up from the revised average of 16.11 per cent for 2022, she said.
“Upward pressure on prices is expected to be driven by the current and lag effect of the global price surge due to the Russian-Ukraine war, domestic insecurity, rising costs of imports, exchange rate depreciation, as well as other supply-side constraints.”
She said overall, fiscal risks were somewhat elevated, following weaker-than-expected domestic economic performance and structural issues in the domestic economy.
Ahmed noted that revenue generation remained the major fiscal constraint of the Federation, stressing that the systemic resource mobilisation problem had been compounded by recent economic recessions.
Director-General of Lagos Chamber of Commerce and Industry (LCCI), Chinyere Almona, in a recent statement, said Nigeria must identify corporate, physical, intangible, human assets, determine their worth, and make plans to repurpose or redevelop idle ones.