The Minister of Finance, Budget and National Planning, Zainab Ahmed, says that with Nigerian National Petroleum Company (NNPC) remitting almost nothing to the Federation Account, the government can no longer sustain petroleum subsidy cost which currently stands at about N250 billion monthly.
She made the disclosure while briefing State House Correspondents on Wednesday after the week’s Federal Executive Council (FEC) meeting, presided over by President Muhammadu Buhari, at the Presidential Villa, Abuja.
The Minister while justifying why subsidy must be removed by 2022 and replace with N5000-a-month transportation grant to the poorest Nigerians, said it was no longer sustainable.
Ahmed said: “The Petroleum Industry Act, has a provision that all petroleum products must be deregulated. And in the 2020 budget, we made a provision to assume that at the maximum by the end of June, we must exit subsidy.
“So this last FAAC the subsidy cost to the Federation was N243 billion. So if we look at a cost of about 250 billion per month, and it has been increasing consistently. So we’re expecting something around N120 billion per month from NNPC.
“And now we’re getting to a point where NNPC is remitting near zero. And if we don’t stop we will get to a point where they will tell you pay me this for managing the fuel provision in the country.
“So if you take 250 billion times 12 months, that is about N3 trillion. If we don’t remove that, that is what it is costing us. This is money that we can use to apply to health and to education.
“The intervention we want to provide, it’s for between 20 to 40 million people and there is still a lot of work going on. We have a committee that is chaired by His Excellency the Vice-President, State Governors and a few of us ministers as members. So we have to have a landing as to the exact number between 20 to 40 million.
“We already agreed it will be N5000 and we have also agreed that the remittances have to be done digitally. So the e-naria will help, but also so are the various payment platforms that are currently available. What we will not do is paying people in cash. So the transfers that people will receive through one kind of electronic money or the other and it’s meant to be for a period of six, nine or 12 months.
“So, these are things that we are still in negotiation because it’s still money that would have to come from the Federation account. So everybody that is a member of FAAC will have to agree on the numbers. The maximum will be 12 months, the minimum will be will be six months.”
Ahmed also noted that the impact of the the economic growth being recorded will not be felt until it surpasses population growth rate.
She said she briefed that council on the third quarter GDP report for 2021 which was released on Thursday last week by the National Bureau of Statistics, affirmed that the result shows an improvement from the contraction that we witnessed in 2020.
Asked why the growth does not impact on Nigerians, she said: “Let me say that, again, the Nigeria economy is growing. And right now we witnessed, four consecutive quarters of GDP growth. We also said that we aspire to continue to push this growth to the point where the growth supersedes the growth in our population, because that’s the time that people will actually feel the benefits.
“So, we’re pushing the bar at the third quarter of 2021. The average annual growth is now 3.3%. Our population growth is roughly about 3.2%. So, we still need to do a lot more for people to feel this. But the fact that the service sector is not in positive territory, it also means that people will actually begin to feel the difference, because it is the service sector that has the first direct impact on people.”
The Minister recalled that Nigeria had negative growth in Q2 and Q3 2020., noting: “We entered into a recession technically and then exited recession by the fourth quarter of 2020.
“So, this report shows that we now have four consistent quarters of growth from Q4 2020 to Q3 2021. The GDP third quarter report shows a growth of 4.03% in the third quarter 2021 compared to a contraction of minus 3.62% in the third quarter of last year.
“So, part of the economic activities that were the major drivers of growth within this reporting period is services which grew by 8.41%. Growth in the service sector was largely driven by better performance in the rail transport sector, pipeline sector, air transport, financial institutions, road transport sector, water transport as well as crude.
“Agriculture also grew by 1.22%. This is a slight dip compared to the 1.3% in the second quarter of 2021. And the reason for the dip has to do with a slight slowdown in agricultural activities in some parts of the country due to security.
“The growth in agriculture that is reported in this quarter is largely driven by crop production. The growth in industry has been consistent, but we have seen a slight slowdown compared to the last quarter 2021 and the contraction of the industry is driven by the poor performance of the crude oil and natural gas sectors, coal mining, quarrying, minerals as well as oil refinery.
“The Q3 GDP report indicates that the oil sector’s contribution to the GDP today stands at 7.49% while the non oil sector contribution to the GDP stands at 2.51%. This indicates that the Nigerian economy is truly very diversified with the oil sector contributing just 7.49%.
“So, factors that are responsible for this growth include the commitment of the government to continued containment of the COVID-19 pandemic, as well as the implementation of fiscal and monetary measures to support businesses contained in the Economic Sustainability Plan.
“It includes the improvement that we’ve witnessed in the rail transport sector, pipelines, air transport, road transport, as well as water transport. It includes improvement in the transportation and the free movement of people as well as goods as the containment measures have been really improved.
“We’ve seen also improvement in the financial services sector with higher supplementary incomes compared to 2020. There’s been improvement in electricity generation and distribution during this quarter as well as improvement in water supply, sewage and waste management and remediation activities.
“There is also indication of higher trade activities which have significantly improved compared to 2020 because of the containment measures that slowed down trade significantly. Also reported is the inflation numbers for the month of October 2021 at 15.99%.
“This is consistent with the decline that we have seen in inflation from April 2021 to date. We expect this decline to continue through the rest of the year and also throughout the year 2022. On the other hand, we have seen an adjustment that has been done in the inflation largely caused by the improvement in the food basket in the inflation mix. And this is largely due to the agricultural harvest which constitutes 50% of the basket and inflation.”
Minister of Transportation, Rotimi Amaechi, on his part said he presented a memo to the cabinet for approval for the award of contract for the provision of training logistics, operational equipment and maintenance support for government… equipment and personnel, under the Integrated National Surveillance and Waterways Protection Solution Infrastructure in Nigeria.
He explained: “This is also what we call the Deep Blue Project. That’s the project that the president launched some months ago, around May or June.
“The contract was awarded at N6,347,967,644.21, inclusive of 7.5% VAT for a period of two years. It’s also important to say that the cabinet was briefed that there’s huge improvement in the security on our waterways now and we hope that it will continue as we progress.”
Just before the commencement of the council meeting, President Buhari led cabinet members to wish his Chief of Staff, Professor Ibrahim Agboola Gambari a happy 77th birthday celebration.
This followed an announcement to the FEC by the Secretary to the Government of the Federation, Boss Mustapha of Gambari’s birthday.
President Buhari congratulated him on the attainment of age 77, and jocularly injected that “you are still going strong, congratulations!”
The ministers present chorused with laughter and birthday good wishes.
Professor Gambari joined the government as Chief of Staff 20 months ago following the demise of the former holder of the office, Abba Kyari.