Nigeria to spend nearly $4 billion on fuel subsidies this year
Nigeria is projected to allocate 5.4 trillion naira ($3.7 billion) in 2024—50% more than the previous year—to maintain stable petrol prices. Additionally, the country plans to borrow an extra 6.6 trillion naira to address budgetary deficits, according to a draft document reviewed by Reuters on Thursday, shining a light on the country’s troubled refinery industry.
The “Accelerated Stabilisation and Advancement Plan” (ASAP), developed by the finance ministry in collaboration with private sector leaders and economists, aims to tackle challenges posed by recent economic reforms intended to stimulate growth.
President Bola Tinubu’s decision last May to abolish a costly petrol subsidy, a move praised by investors, led to a threefold increase in petrol prices, higher transport costs, and rising inflation, causing public discontent. Despite pressure from labor unions, Tinubu remains committed to these reforms. Since July last year, petrol prices have remained fixed, despite two currency devaluations. Nigeria continues to depend on imported petroleum products due to the low output from its state-owned refineries.
“Given the current rates, fuel subsidy expenditures are expected to reach 5.4 trillion naira by the end of 2024, compared to 3.6 trillion naira in 2023 and 2.0 trillion naira in 2022,” stated the finance ministry in the draft document.
Presidential aide Bayo Onanuga noted that President Tinubu received the draft on Tuesday, highlighting that it is a proposal with suggestions for enhancing the Nigerian economy.
Analysts suggest that if the president approves the policy, he may issue executive orders to implement its recommendations. These recommendations encompass the power, oil and gas, agriculture, and healthcare sectors, with provisions for business support. Nigeria’s economy has been sluggish, growing around 3% annually, well below the 6% growth target set by Tinubu when he assumed office last year.
The draft policy document proposes the government sell equity in its refineries by May 2026, increase the excise duty on beverages, and introduce taxes on single-use plastics and sweetened beverages to generate revenue. Furthermore, the government aims to boost oil production to around 2 million barrels per day by December, up from the current 1.4 million, to improve cash flow and close revenue gaps.
