Emeka Okoroanyanwu
Nigerians have been warned to prepare for another fuel price increase as the current subsidy on the commodity is not sustainable.
Managing Director and Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane said this during a presentation at the Lagos Business School Breakfast Session.
He said: “A gradual reduction in subsidy payments is anticipated. Only N305 billion set aside for under-recovery in 2019 budget; expect an increase in the pump price of fuel, 40 per cent shortfall in provision for subsidies (under-recoveries) points to possible price increases.”
He, however, said a petrol price hike would result in high inflationary pressure.
According to Rewane, Nigeria has one of the lowest tax to Gross Domestic Product ratios at 5.3 per cent and described the 2019 budget as counter-cyclical, saying the economy was in dire need of a boost.
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He said with expenditures much higher than sustainable revenues, the fiscal deficit had widened by 2.15 per cent to N1.9tn, adding that the supplementary budget could not be avoided.
“Oil revenues are projected to decline due to the impact of OPEC quota on Nigeria’s oil output level,” he added.
On new minimum wage funding and its impact on states, Rewane noted that states civil service accounted for about 1.9 million workers.
He said, “States get 85 per cent of Value Added Tax, as well as other statutory allocations, in addition to internally generated revenue. Personnel expenses of most states exceed IGR. So, there is either an expense problem or a revenue problem.
“IGR remains key to the funding of the new minimum wage. Funding through the statutory allocation (Federal Accounts Allocation Committee) is unsustainable.”
