Fuel Importation: Nigeria's $600m Monthly Burden

Wale Edun

Nigeria's Fuel Import Costs: $600m Monthly

FG spends $600m monthly on fuel imports...

Nigeria's Finance Minister, Wale Edun, addresses fuel import challenges, subsidy removal, and economic growth, while prioritizing food security and affordability for citizens.

Wale Edun revealed that Nigeria's hefty $600m monthly fuel import bill is partly due to neighboring countries, including those in Central Africa, benefiting from the country's fuel imports.

Edun made this statement on Wednesday, August 7, explaining that this situation led President Bola Tinubu to scrap the fuel subsidy. He highlighted that Nigeria lacks accurate data on its internal fuel consumption.

According to the National Bureau of Statistics (NBS), petrol imports significantly decreased to an average of one billion liters per month after President Tinubu removed the fuel subsidy on May 29, 2023.

He said, “The fuel subsidy was removed May 29, 2023, by Mr President, and at that time, the poorest of 40 percent was only getting four per cent of the value, and basically, they were not benefitting at all. So it was going to be just a few.

“Another point that I think is important is that nobody knows the consumption in Nigeria of petroleum. We know we spend $600 million to import fuel every month but the issue here is that all the neighbouring countries are benefitting.

“So we are buying not for just for Nigeria, we are buying for countries to the east, almost as far as Central Africa. We are buying. We are buying for countries to the North and we are buying for countries to the West. And so we have to ask ourselves as Nigerians, how long do we want to do that for and that is the key issue regarding the issue of petroleum pricing.”

Wale Edun stressed the need for urgent action to tackle the fuel import challenge, citing its detrimental impact on Nigeria's economic growth.

He reassured that the government prioritizes the well-being of its citizens, particularly the vulnerable, and is committed to ensuring food security and affordability, recognizing the significance of this basic need.

Furthermore, the finance minister provided clarification that the disbursement of N570 billion to state governments had already been executed in December last year, addressing any confusion or uncertainty surrounding the timeline of the fund release.

He said, “This actually refers to a reimbursement that they received from December last year onwards and it was a reimbursement I think under the COVID financing protocol but the point is that the states have received more money. They have received more money. Mr President has charged to ensure food production in the states.”

Wale Edun provided further clarification on the recent increase in the maximum borrowing limit under the Ways and Means facility from 5% to 10%. He emphasized that this move does not signal a reliance on Central Bank of Nigeria financing by the Federal Government.

Instead, Edun explained that the government has been utilizing market-based instruments to manage its debt obligations, demonstrating a commitment to diversifying its funding sources and maintaining fiscal discipline.

The minister said, “We have not gone to the central bank to say, please lend the government money to pay its debt, to pay its salaries. That's Ways and Means. We have not gone. In fact, we have used market instruments to pay down what we owed, and that is a very, very germane aspect of having a strong economy.

“It was raised to 10 percent, but that doesn't mean it will be used. It's there as a fail-safe and just gives that extra flexibility so that if a payment needs to be made and there is a mistiming or gap in when revenue would come in and expenses, we can just draw it down briefly.”

Edun characterized the National Assembly's approval of the increased borrowing limit as a precautionary measure, intended to provide a safety net or contingency option, rather than a primary reliance for government financing.

The minister added, “Sometimes it just gives that extra flexibility so that if a payment needs to be made and there's a mistiming, there's a gap between the time at which the revenue will come in and the expenses needed, you can just draw down briefly.

“So, the aim is to keep within the letter of the law, I think that's the main point.”

Edun reiterated that the well-being of Nigerians is a top priority for the current administration, with a strong emphasis on guaranteeing access to sufficient and affordable food for all citizens, thereby ensuring food security and alleviating the burden of hunger and poverty.

Edun said, ”There is a concerted effort to ensure that we have homegrown food available. In the short term, apart from what is being distributed from reserves, there is a window that has been opened for importation because the commitment of Mr President is to drive down those prices now and make food available now.”

Edun guaranteed that local farmers would be protected, as imports would only be considered as a last resort, after exhausting all available domestic supplies, to ensure that homegrown produce is fully utilized and supported.

“So, one of the conditions for this importation will be that everything available locally in the markets or with the millers and so forth has been taken up. We will have auditors that will check that,” Edun said.

Edun provided assurance that the measure would not adversely affect local farmers, as imports would only be permitted when domestic production and supplies have been fully utilized, thereby ensuring that local agricultural produce is prioritized and supported.