The federal government will likely spend N5.4 trillion ($3.72 billion) this year to subsidise fuel and keep the prices fixed at current rates. This compares unfavourably with N3.6 trillion in 2023 and N2.0 trillion in 2022.
The government will also need an extra N6.6 trillion in a supplementary budget, to fund the implementation of the Accelerated Stabilisation and Advancement Plan (ASAP) designed to advance President Tinubu’s economy-related “8 Priority areas.”
President Tinubu had on assumption of office declared that fuel subsidy was gone. That led to a spontaneous spike in the prices of goods and services as the price of fuel jumped from N238 in May 2023 to over N690 in May 2024. This has driven the nation’s headline inflation to 33.69 percent and food inflation to 40.5 percent.
The Accelerated Stabilisation and Advancement Plan’ (ASAP), drafted by the finance ministry with private sector executives and some economists, aims to address challenges affecting reforms aimed at boosting growth.
“At current rates, expenditure on fuel subsidy is projected to reach N5.4 trillion by the end of 2024,” the draft showed.
Presidential aide Bayo Onanuga on Thursday said that President Bola Tinubu on Tuesday received the draft, which is still a proposal containing suggestions on how to improve the Nigerian economy.
ASAP, among other things, recommended the unbundling and commercialization of the Transmission Company of Nigeria (TCN). It also recommended the procurement of seven million smart meters and 150,000 distribution transformers to enable growth of the power sector.
The ASAP recommended intervention in four critical sectors with an estimated spending of N6.6 trillion. The sectors are Agriculture and food security, Energy (Power and Gas), Health and social welfare, and Business support.
According to the document, “Emergency intervention is expected to cost approximately N6.6 trillion; proposed spending that is currently not in the Full Year 2023 budget. The proposed spend represents 2.1 percent of Full Year Estimate, FYE 2024 Gross Domestic Product (GDP).
“The estimated additional spending outlined does not include any fiscal implications from the freeze on the price of PMS Year-to-Date, YTD 2024.
“Approximately 49.0 percent and 27.0 percent are targeted at the energy sector and for business support, respectively.
“A supplementary budget for N6.6 trillion would need to be in place with the appropriate funding (backed by an approved borrowing plan)
“At an adjusted spend of 75.0 percent of the proposed emergency funding requirements; approximately N5.0 trillion would be required.
Meanwhile, President Bola Tinubu is to issue 20 Executive Orders (Eos) for the implementation of the ASAP.
They include: Import duty & VAT suspension on specified items; Importation of paddy rice by millers; Import duty exchange rate; Peg (to be held at $800/$1); and Prioritising productive spending approvals
Specific Eos on relief for wage awards and transport subsidy to low-income staff include: Tax deduction for a salary of incremental staff; an additional 50 percent uplift on eligible deduction on transportation and other allowances; and Enabling foreign employment for Nigerians as remote Workers.
Similarly, three Eos are proposed for tax exemption for repatriated export proceeds of services & Intellectual Property.
They include: Zero-rated VAT for all non-oil exports; relaxation of restrictions on the use of export proceeds; and removal of Tax Clearance Certificate as a condition for foreign exchange application.
To cut costs, Eos are to be issued on MDAs to remit operating surplus above N5 billion; no foreign trips for events targeted at Nigerians; electronic payment of estacode; direct payment to MDAs’ contractors; access to funds subject to statement of accounts presented; and payment of fees; and payment of fees in Naira & MDAs foreign exchange banked with Central Bank of Nigeria.
Under the Tax Information Consolidation & Collaboration Initiative (TICC), there will be Eos namely: Create TICC Data Bank to be managed by the Joint Tax Board; Mandatory use of NIN and Registered Company numbers; one government directive on data generated by MDAs and National Tax data governance framework the draft document indicated that the federal government aims to increase electricity supply to 6 GW by December this year.
Furthermore, ASAP recommends that the 6 GW of power to be delivered to the grid by December 2024 would be achieved in a full market-based structure, as the government figures out how to recoup the N1.5 trillion of unpaid liabilities to gas companies and electricity-generating companies (Gencos).
To achieve this, the government is to provide concessionary funding for metering through the Presidential Metering Initiative program to improve sector liquidity and allow for targeting of subsidies.
“Government to provide counterpart funding for finalisation of projects, especially those over 70.0 percent completion,” it said.
In the process, the government will be expected to commence liquidation of N1.5 trillion liability and non-performing value chain participants should be penalized while ensuring sustainable, low-cost energy sources that should be integrated to lower the average cost of power.
The ASAP documents have recommended the implementation of time-bound community-based solutions including those recommended by the Petroleum Industry Act (“PIA”) to end pipeline vandalism which currently characterizes the oil sector of the country.
In addition, it recommended the implementation of a long-awaited fast-track implementation of time-bound technology-based surveillance and security systems.
The above is part of various actions to ramp up oil production to 2mbpd and place Nigeria on a trajectory to become the number one oil investment destination in Africa with prolific production to meet development needs.
The document also calls for a more sustainable downstream industry with a mix of fuels and limited government support, while becoming the regional refined oil destination.
With a health sector characterized by high infant and child mortality, high maternal mortality, high levels of infection and non-communicable diseases, high cost of drugs and inadequate personnel, the ASAP advocates government fund tuition for healthcare workers in training; support 20, 000 students for four years and strategically redeploy frontline healthcare workers.
In addition, essential medicines should be made available at a lower cost for 80 – 90 million Nigerians with expanded healthcare insurance coverage for one million vulnerable people, as well as, 40, 000 redistributed health workers to provide services to 10 – 12 million patients, 4,800 Primary Health Centres (PHCs) powered-up (and 2nd Tier and 3rd Tier hospitals).