A Review of the Nigerian Energy Industry

Nigeria: Petroleum subsidy to gulp N1trn in 2015

19 October 2014, Abuja – The Federal Government is to spend the sum of N971 billion to subsidise the supply of petrol to Nigerians in 2015, an indication that the administration has no plan to do away with subsidising petrol.

Fuel-queueIn the same vein, the government plans to give out N260 million to the Subsidy Reinvestment Programme, SURE-P, for intervention in various development agencies, while N250 billion would be spent as subsidy on kerosene.

This is contained in the 2015-2017 Medium Term Expenditure Framework and Fiscal Strategy, MTEF paper, which President Goodluck Jonathan sent to the National Assembly for approval as the basis for the 2015 budget of N4.817.76 trillion

The Senate President, Senator David Mark has already directed the Joint Committee on Finance and Appropriation to work on the Paper within two weeks.

Senator Mark said the early conclusion of work on the document would enable the senate to determine early passage of the proposed 2015 budget.

According to the document, which Vanguard obtained last night, the government expects to receive fabulous revenue of N7.164 billion from oil and gas and N3.2 billion from non-oil revenue sources within the year.

Overall, the administration is expecting N11.1 billion as total federally collectible revenue for 2015, as against the projection of N10.894b for the current year.

Of its oil revenue, according to Jonathan, the sum of N858.59 billion will be spent as its contribution to the cost of oil production while N209 billion will go to National Domestic gas development and N78 billion set aside for Gas infrastructure development.

The MTEF document also indicated that the Federal Government had projected that it would spend N1.029 trillion as capital expenditure for ministries, departments and agencies.

It added that N1.801 trillion would be spent as personnel costs for the MDAs while service wide votes would gulp N376.05 billion and N570 billion projected as new borrowings in 2015.

As part of efforts to tackle crude oil theft and pipeline vandalisation, the security agencies are expected to start ground and aerial surveillance, while the Justice Ministry would ensure speedy prosecution of oil thieves and vandals.

According to the document, “The activities of crude oil thieves and oil pipeline vandals remain the main risks to oil production. The potential implications of their activities are a reduction in government revenue with further impacts on government debts and fiscal deficits as well as pressures on the exchange rate.

“Given the role of oil production volume on government finances, government remains committed to curbing these nefarious activities. Consequently, it is intensifying security, particularly ground and aerial surveillance, around oil facilities through the combined efforts of security agencies and local communities’ participation.

“These security forces under the National Executive Council Committee are being better equipped to checkmate the activities of oil thieves and pipeline vandals. There would also be better engagements of the Ministry of Justice and lawyers for faster prosecution of oil thieves.”

Government also informed the National Assembly that it had already set up a committee expected to partner with other agencies to tackle the Boko Haram sect, adding, “The issue of insurgency in parts of the North east is still a risk to economic and commercial activities, and by extension, government tax revenue.

“Consequently, government will intensify the utilisation of its three-pronged approach including a firm security response, continued political dialogue and a package of development assistance to checkmate the security situation.

“Already, a Presidential Initiative for the North East Committee is working together with some development partners to finding a lasting solution to the insurgency.”

In the letter he addressed to the leadership of the National Assembly, Jonathan admitted that the oil sector was not witnessing new investments due to uncertainty occasioned on the non-passage of the Petroleum Industry Bill, PIB.

Jonathan explained that the oil benchmark of $78 pb was predicated on the projected balance between increasing global supply resulting from rising oil and unconventional oil production, and production disruptions that may result from geopolitical risks.

According to the President : “Our proposal is also driven by the need to be cautious in our revenue projections given the volatile nature of oil prices and the need to rebuild our fiscal buffers, which have been very useful in periods of revenue shocks”.
*Soni Daniel & Johnbosco Agbakwuru – Vanguard

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