Nigeria’s expenditure on fuel subsidies from 2005 to 2021 amounted to $74.39 billion, according to the Nigeria Extractive Industries Transparency Initiative (NEITI). This figure is equivalent to N13.69 trillion. NEITI commended President Bola Tinubu for his declaration on subsidy removal and called for the implementation of NEITI’s recommendations. The subsidy regime has placed a significant financial burden on Nigeria’s economy, and NEITI emphasized the importance of taking bold steps to prevent leakages, increase revenues, and drive reforms in the oil, gas, and mining sectors.

NEITI disclosed these findings in a statement signed by Mrs. Obiageli Onuorah, the Deputy Director/Head of Communications and Stakeholders Management. The statement highlighted the persistent request by NEITI since 2006 to remove fuel subsidies, citing concerns about the negative impact of the subsidy regime on Nigeria’s economic growth.

The statement provided a breakdown of the subsidy payments over the years, with notable increases in 2008, 2010, and 2011, reaching a peak of $13.52 billion (N2.11 trillion). However, subsidies declined in subsequent years, with the lowest point being $473 million (N154 billion) in 2017. The reduction was short-lived as subsidy payments surged to over $3.88 billion (N1.19 trillion) in 2018 and $3.58 billion (N1.43 trillion) in 2021.

The statement also highlighted the staggering annual, monthly, and daily average expenditure on subsidies, amounting to N805.7 billion, N67.1 billion, and N2.2 billion, respectively. NEITI emphasized that the subsidy expenditure from 2005 to 2021 was equivalent to the entire budget allocation for health, education, agriculture, and defense in the past five years. Furthermore, it matched the capital expenditure for ten years between 2011 and 2020.

NEITI raised concerns about the funding sources for subsidies, which heavily relied on federation accounts funds, the federal government, and sometimes external borrowing. These funding methods had adverse consequences on the government’s overall revenue profiles. The consequences of funding subsidies included a underdeveloped downstream sector, declining GDP growth, product theft, pipeline vandalism, environmental pollution, pressure on foreign exchange, naira depreciation, low employment generation, worsening balance of payments, and increasing national debt.

NEITI released a policy advisory urging the removal of subsidies and outlined eight steps to manage the transition. They also stressed the need for people-oriented welfare programs, rehabilitation of the nation’s refineries, and measures such as enforcing sanctions and conducting stakeholder consultations in the sector.

In response to President Bola Tinubu’s announcement on subsidy removal, the Asiwaju Bola Ahmed Tinubu Media Centre clarified that the panic buying that ensued was unnecessary. They emphasized that the subsidy removal would not take immediate effect until the end of June. The public was advised to understand that President Tinubu’s declaration was simply communicating the status quo, as the previous administration’s budget for fuel subsidy was planned and approved only for the first half of the year. This means that by the end of June, the federal government would no longer have funds to sustain the subsidy regime, leading to its termination.

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