The Managing Director and Chief Executive Officer, Financial Derivatives Company Limited, Bismarck Rewane, has revealed that a gradual reduction in subsidy payments is anticipated which could lead to increase in the pump price of fuel.
He said fuel subsidies are a huge drain on government’s revenue.
Rewane stated this in his presentation at the Lagos Business School Breakfast Session on May 8.
He noted that the World Bank put Nigeria’s total subsidy bill in 2018 at N731bn, saying, “A gradual reduction in subsidy payments [is] anticipated. Only N305bn 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.”
The financial expert, 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.
He described the 2019 budget as counter-cyclical, saying the economy was in dire need of a boost.
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.