Oil crisis hits Nigeria’s economy: budget deficit widens, petrol scarcity lingers, prices of diesel, aviation fuel rocket.

11 Mar Oil crisis hits Nigeria’s economy: budget deficit widens, petrol scarcity lingers, prices of diesel, aviation fuel rocket.

Rather than enjoy the temporary boom of the oil market, Nigeria has been hit by worsening crisis, as rising crude oil prices wreaks havoc on the economy with higher subsidy payment, disruption of productivity and inflation. All these are happening in the backdrop of petrol scarcity caused by the importation of contaminated fuel; and a crash of electricity supply

Finance Minister Zainab Ahmed admitted yesterday that rising crude oil prices had widened the country’s budget deficit, revealing that the federal government was presently in the process of amending the budget to accommodate fuel subsidy.

She spoke yesterday at the 10th African Fiscal Forum titled, “The Political Economy of Fiscal Reforms,” organised virtually by the International Monetary Fund (IMF).

She said, “We are cleaning up our subsidies; we had a setback as we were to remove subsidy by July this year, but there was a lot of pushbacks. We have elections coming and also because of the hardship that companies and citizens faced due to the COVID and we were told that the timing was not right, so we pulled back.

“But we have been able to quietly implement subsidy in the electricity sector and as it is, as we speak, we don’t have subsidies in the electricity sector.

“Fuel subsidy is a huge problem for us. It has thrown up our deficit much higher than we planned. What is happening to the global oil prices is also going to, perhaps, worsen matters. But the current review we are doing is to say we will hold the subsidy at the level in which it is planned.”

“We are currently doing a budgetary amendment to accommodate the incremental subsidy as a result of the reversed decision and we want to cap it at that.

“Hopefully, the parliament will agree with us and also at least contain the subsidies; otherwise, the way things are going now, we will not be able to predict where the deficit will be as a result of the fluctuation in the global markets.”

She spoke as the aviation industry lamented galloping prices of aviation fuel and industries decried higher diesel prices.

The price of automotive Gas Oil (diesel) also continued to rise over N650 per litre in some areas on Thursday, transporters and other users are reflecting the increase in their prices.

In Lagos, diesel sold for between N610 and N645/litre in some fuel stations. The Aviation Operators of Nigeria (AON) has warned that the safety of flights in Nigeria may be in danger because of the persistent hike in the price of aviation fuel.

Allen Onyema, the CEO of Air Peace, said the price of aviation fuel moved from N190 per litre to N670 per litre within two weeks.

Amid the crisis, Mrs Ahmed, however, said there was improvement in revenue generation.

She said, “We have also enhanced our budget process. Three years ago, we had no government enterprise on the national budget, just the government itself. We started with 10, three years ago.

“Two years ago, we brought in 40 and now we have all the government-owned enterprises, which is about 61 agencies, in the national budget. So, we are able to see the whole of the revenue and the whole of the expenditure.

“This is enhanced also by automation in terms of the public financial management. As a result of that, we have been able to see the need to refine our fiscal laws.

“We have seen revenue from government-owned enterprises increase by 100 per cent within a 12-month period just by being able to pull everything together, put monitoring mechanisms, and being able to track and also put regulations and laws in the finance bill that caps the expenditure to revenue ratio of these government enterprises to 50 per cent. “So, we saw our revenue double and we are seeing the potential revenue from these enterprises again doubling in this current year as we speak.”