by YNaija Editor
The Federal Government has revised upwards its outlook for the budget deficit this year, due to the cost of the partial reinstatement of petrol import subsidies. The government will pay for the move by raiding crude oil savings.
The finance ministry announced a few minutes ago that the 2012 deficit would reach 2.97 percent of gross domestic product, up from 2.77 percent in the previous fiscal plans announced in December.
The FG removed fuel subsidies on January 1 but was forced to partially reinstate them after tens of thousands took to the streets in more than a week of protests over the increased cost of petrol.
The new 2012 budget includes costs of 888 billion naira for fuel subsidies, up from 155 billion in the previous plans.
The federal government’s 309 billion naira share of the subsidy will be funded out of the excess crude account (ECA). The rest will be funded by state and local governments.
Since the Obasanjo administration, Nigeria has saved money earned from crude exports over each year’s benchmark price into the ECA to help cushion the economy from potential oil price shocks.
The ECA contained more than $20 billion in 2007 but despite a period of record high oil prices since, the account has been drained and only contained $3 billion at the end of last year.
The Finance Ministry said it would fund the rest of the increased deficit from privatisation proceeds, oil signature bonuses and by cutting costs and squeezing out more revenues from government offices. Domestic borrowing remains at 794 billion naira, as in the last proposal.
Total expenditure in the new budget plan will be 4.649 trillion naira, down from 4.749 trillion in December.
“Ordinary this (subsidy reinstatement) would have resulted in a very large deficit … (but) the government has taken very strenuous steps both on revenue and expenditure to reduce the impact of partial deregulation,” the finance ministry proposal said.