On the 7th of April, Nigeria’s President, Muhammadu Buhari, noted that the country would need up to four trillion naira for 2022 subsidy payment, up from the earlier projected N3 trillion. This development was blamed on rising oil prices amid high global demand.
A Dataphyte report had earlier noted how Nigeria’s subsidy payment will rise alongside increase in Crude Oil prices. Nigeria’s subsidy payment is further impacted by importation of refined petroleum which exposes the landing price of petroleum to foreign exchange changes.
A Dataphyte review of the proposed expenditure, according to the approved 2022 budget has shown that Nigeria will be spending an equivalent of 74.07% of its capital expenditure for 2022 on subsidy payments.
Nigeria plans to spend N5.4 trillion in 2022 as capital expenditure and these Funds are essentially for development projects in the country. An earlier report by Dataphyte had examined what was possible if subsidy payments were directed at other sectors like education and healthcare, where the country is grossly lacking.
The burden of subsidy payments have continued to balloon and different groups including the International Monetary Fund have urged the federal government to remove the subsidy. The body had argued that Nigeria needed policies such as subsidy removal to fully tap into the economic possibilities for 2022.
Between 2006 and 2019, the country spent over N10 trillion on subsidy payment. In the same period, the country spent N14.68 trillion on capital expenditure. This would mean the country has spent 68.1% of the value of its capital expenditure on subsidy in the last fourteen years.
There are fears that given the increase in subsidy bill, the country may find it hard to meet its fiscal needs and subsidy payment may shortchange the country on other developmental needs that could have been enjoyed by residents of the country.
Already, the government plans to take loans to fund the 2022 budget deficit, a development that would widen the debt burden of the country currently put at N39 trillion.