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Tuesday, March 28, 2023

Fuel Subsidy to Gulp 95% of Nigerian Government’s Revenue

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Assuming fuel subsidy continues all through 2023, 95 percent of government revenue will be spent on subsidy, thereby limiting expenditure on crucial infrastructure needed to propel economic growth in the medium to long term.

This is according to a new report by Chapel Hill Denham Limited glimpsed by MoneyCentral.

Analysts at Chapel Hill Denham said subsidy for the first-half of 2023 alone is 47 percent of retained revenue.

The World Bank, the International Monetary Fund (IMF) and analysts say eliminating the subsidy saves the government money that can be expended on bridging infrastructure gaps.

It is important to note that the bills have hindered the country from benefiting from the rally in crude oil price that is underpinned by Russian invasion of Ukraine.

Eliminating subsidies is imperative to ease fiscal pressure in 2023,” said analysts at Chapel Hill Denham.

Pan-African credit rating agency and foremost business information provider, Agusto & Co has forecasted that Nigeria’s total subsidy bill would reach N5 trillion in 2023.

The IMF had urged the government to phase out subsidies in mid-2023, saying it was draining revenue and causing fiscal imbalances.

“Directors highlighted the need for bold fiscal reforms to create needed policy space, put public debt on sound footing, and reduce vulnerabilities,” said the IMF.

“In the medium term, Directors recommended modernizing customs administration, rationalising tax incentives, and raising tax rates to the levels of the Economic Community of West African States,” adds IMF.

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