With rising oil costs caused by the Russia-Ukraine war, Nigeria’s petrol subsidy scheme might cost 4 trillion naira ($9.6 billion) this year, up from 443 billion naira last year, the president informed lawmakers in a letter demanding additional funding.
President Muhammadu Buhari cited a rise in oil prices, exacerbated by Russia’s invasion of Ukraine in February, as well as decreasing petroleum production at home as reasons for his decision.
Subsidies for gasoline have been predicted to cost up to $7 billion per year due to rising oil prices.
“At a time when crude oil prices are high, the decision to defer the elimination of the petrol subsidy has increased the subsidy cost,” Buhari wrote in the letter seen by reporters.
Buhari has requested lawmakers to increase the benchmark oil price for 2022 from $63 to $73, reduce anticipated crude production by 283,000 barrels per day to 1.6 million, and reduce the cost of publicly supported upstream projects.
He raised police funding to “support their morale as they struggle with the country’s heightened security problems.”
Nigeria’s administration reversed a commitment to halt subsidies in January, instead of extending them for another 18 months to avoid any demonstrations in the run-up to next year’s presidential elections.
However, the price of oil has risen dramatically. Despite being a crude oil exporter, the West African country relies almost exclusively on imports to cover its local gasoline needs.
Buhari predicted that the budget deficit would rise to $7.35 trillion, or 3.99 percent of GDP and that the increase would be covered by fresh domestic borrowings.
The deficit was fixed at 3.42 percent of GDP at the outset.
Nigeria sold $1.25 billion in Eurobonds this month, at a premium to equivalent tenors, to help support its costly gasoline subsidy scheme in the face of low oil revenues.
