Muhammadu Buhari, the president of Nigeria, announced Friday that he would be removing a pricey gasoline subsidy because he anticipated severe revenue shortfalls. Nigeria, despite being a major oil exporter, imports the majority of its gasoline, and a subsidy keeps consumer prices low at the pump.
Despite being well-liked by Nigerians, the subsidy is expensive; the cost is expected to be $9 billion this year. In his address to a joint meeting of the National Assembly on Friday in Abuja, President Buhari noted that the topic of petroleum subsidies has been a persistent and divisive one in our nation’s public policy since the early 1980s. But, he continued, “its current fiscal impact has amply demonstrated that the policy is unsustainable.”
The burden on Nigeria’s consumers, who are already struggling with the inflationary effects of Russia’s war in Ukraine and the end of the Covid pandemic, would increase if the government moves forward with ending the subsidy.
For 2023, Buhari unveiled a record budget of 20.51 trillion naira ($47.4 billion), an increase in spending of nominally 18.4% from this year. It is unlikely that there will be much, if any, change in real terms, however, given that inflation is currently running at over 20% and is predicted to be 17.16% for the following year in the budget.
According to Buhari, the country’s economy will expand by 3.7 percent in 2023, up slightly from the 3.55 percent rate anticipated this year.
Nigeria’s tax revenue has been severely impacted by the economic fallout from the Ukraine war and the Covid-19 pandemic. According to Buhari, the projected budget deficit will be 10.78 trillion naira, or just over half of the amount that was budgeted.
According to him, non-oil taxes are expected to contribute 2.43 trillion naira to the projected 1.92 trillion naira in oil revenue. According to Buhari, the budget assumes an oil price of $70 per barrel, an exchange rate of 435.57 naira to the dollar, and a production rate of 1.69 million barrels per day (bpd) of crude from the oil-rich Nigeria.
Nigeria, an OPEC member, has struggled to meet its quota of 1.8 million bpd due to inadequate production capacity and widespread oil theft, which has hurt revenue and depleted foreign reserves. Legislators must approve the budget.
Nigerians will vote in February to choose a replacement for Buhari, 79, who will leave office after eight years in charge of Africa’s most populous country.
The next president will have to deal with a number of pressing issues as Nigeria’s economy struggles, its vital oil production is at record lows, and insecurity is a major issue.