Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister of the Economy, has announced that the country is currently expending $600 million each month on fuel imports.
Explanation for Elevated Import Bills
During an interview on AIT’s Moneyline program, Edun elaborated on this significant import bill. He indicated that the cost is driven by the extensive fuel needs of neighboring nations extending into Central Africa, which are benefiting from Nigeria’s fuel imports.
Removal of Fuel Subsidy and Consumption Challenges
Edun attributed the decision by President Bola Tinubu to remove the fuel subsidy as a crucial measure due to the unclear domestic fuel consumption figures.
Prior to the subsidy removal, it was estimated that the poorest 40% of Nigerians only received a minimal four percent of the subsidy’s value, making it largely ineffective for the majority.
Following the subsidy removal on May 29, 2023, Nigeria’s petrol importation decreased to an average of one billion liters per month.
Edun noted, “The fuel subsidy was removed on May 29, 2023, and at that time, the poorest 40% were getting only four percent of the value, indicating they were essentially not benefiting from it.”
Regional Impact of Fuel Imports
He further explained that the high import costs stem from the fact that Nigeria is supplying fuel not only for domestic use but also for neighboring countries in the east, north, and west, reaching nearly as far as Central Africa.
This situation raises concerns about the sustainability of such expenditures.
Financial Measures and State Support
Regarding financial support to state governments, Edun clarified that the N570 billion fund released in December of the previous year was a reimbursement under the COVID-19 financing protocol.
He emphasized that states have received additional funds, which President Tinubu has directed towards enhancing food production.
Impact of Increased Borrowing Limits
Edun addressed the recent increase in the maximum borrowing limit for Ways and Means from five to ten percent.
He reassured that this adjustment does not indicate a reliance on Central Bank of Nigeria (CBN) financing but rather a strategic move to address fiscal needs.
Prioritizing Welfare and Food Security
The minister reaffirmed that the administration remains committed to ensuring the welfare of Nigerians, with a focus on food availability and affordability.
He stated, “There is a concerted effort to ensure that we have homegrown food available. In the short term, besides utilizing reserves, importation will be allowed only after local supplies are exhausted.”
Local Supply and Importation Guidelines
To prevent undermining local farmers, Edun assured that importation would only occur if all available local resources have been utilized. Auditors will be employed to verify local supply exhaustion before imports are permitted.
Economic Stability and Investment
Edun concluded by emphasizing that these interventions are designed to mitigate inflation, stabilize exchange rates, and lower interest rates, thereby fostering a favorable environment for investment and job creation.