The Federal Government that is struggling to pay lecturers’ salaries and expend on money on infrastructure has spent N2.20 trillion so far this year on petrol subsidies, an amount that is 12 percent of the country’s liquid foreign reserves.
This is according to a recent report by United Capital research, and analysts from at the investment house say the regime has overstayed its welcome as it further compounds the currency crisis.
Aside from underpinning corruption and wastages, analysts at CSL Stockbrokers are of the opinion that the huge subsidy payments termed as value shortfall/under recovery is no longer sustainable and raises significant fiscal concerns.
“At this point, given the government’s plans to retain petrol subsidy till June 2023, the country’s fiscal strain is far from over,” said analysts at CSL Stock Brokers Limited.
“Although, the federal government has engaged the services of the indigenes through a pipeline surveillance contract to combat the heightened vandalism and crude oil theft, we expect the gains from these measures to remain subdued for as long as the petrol subsidy regime remains in place,” said analysts at CSL Stockbrokers.
The International Monetary Fund has warned that subsidy payment may hit N6 trillion in 2022.
The multilateral lender also revealed that a macro-fiscal stress test it conducted on the country showed that interest payments on debts in the country could amount to Nigeria using 100 per cent of its revenue to service debts by 2026 if not closely monitored.
To underscore the precariously anemic situation, the government is borrowing to fund the budget as debt servicing costs have eaten deep into revenue despite a rally in crude oil price.
The next president will be inheriting debt piles as the President Buhari administration is set to borrow N11 trillion in 2023.
“In this scenario, the budget deficit is projected to be N11.30 trillion in 2023, up from N7.35 trillion in 2022. This represents 5.01 percent of the estimated GDP, above the 3 percent threshold stipulated in the Fiscal Responsibility Act, 2007,” said Zainab Ahmed, minister of finance, budget and national planning.