FG is saving N35.6 Billion each month on subsidy - where is the money?

The official subsidy savings data that we have (8 months in 2012 and 2 months in 2013) all indicate that the government is saving 35.6 billion naira each month of which 16.3 billion is going to the federal government, 12.9 billion is going to the states, and 6.4 billion is going to LGAs. Extrapolating these figures we have:

• N500 billion or approximately $3.08 billion in total savings since partial removal of fuel subsidy in January 2012.

• N228 billion or approximately $1.4 billion has gone to the federal government.

• N180.6 billion or $1.1 billion has gone to state governments.

• N89.6 billion or approximately $553 million has gone to local government areas.

We know that the federal government has been doing a responsible job in terms of shoring up the excess crude account and starting the sovereign wealth fund. Such action has improved the financial profile of the government and will protect against future shocks. There was much talk of reinvestment of these subsidy savings, but the implementation of this reinvestment is much harder to quantify.

B) For the months of January and February this year, Nigeria has been earning close to N800 billion or approximately $5 billion each month in revenue. Of this amount, about N300 billion is going to the federal government (37.5%), N175 billion is going to the state governments (22%), and N135 billion is going to LGAs (17%).

So the allocations to the various levels of governments eat of 76.5% of the pie. Of the remaining 23.5%, some money is being allocated to a “Derivation Fund,” for which we’ll have to do more research to determine exactly what that is (13%), and the remainder is being saved in the Excess Crude Account (10.5%).

So there’s the divvy up. Of note, if the price of oil holds steady, which is not a certainty given increased bunkering and rising energy independence, Nigeria can expect revenues of N9.6trillion naira or close to $60 billion. That would be 26% of Nigeria’s 2011 GDP, which was measured at 235 billion according to the World Bank. That’s not bad considering that USA’s budget as a percentage of GDP hovers around 40%.

Of course, these are all numbers and it is important to find the real development story behind them. We know that Nigeria’s GDP has been growing at 5-7% per year, even with the global recession. Will that translate to improved lives and decreased suffering? Stay tuned as we dig deeper to find out

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