Again, FG Reiterates Plan to End Fuel Subsidy June 2023

Sunday Ehigiator

Amid acute fiscal crisis undermining governance nationwide, the federal government at the weekend reiterated its plan to discontinue fuel subsidy by mid-2023, lamenting that it spent N4 trillion on fund fuel subsidy in 2023 alone.

The apex government also explained that its capacity to finance healthcare “is currently constrained by inadequate revenues and fiscal drainers despite 203% increase in health sector allocation since 2016.

Director General, Budget Office of the Federation, Mr. Ben Akabueze made the remarks at the eighth Future of Health Conference held in Abuja Thursday and Friday.

The conference, organised by a non-governmental organisation, Nigeria Health Watch, was held under the theme, ‘The Political Economy of Health: Investing in the Future of Nigeria.”

Akabueze, represented by his Technical Adviser, Prof. Olumide Ayodele, dissected the fiscal constraints of the health sector over the years, the director-general said the federal government’s ability to finance healthcare is currently constrained by inadequate revenues and fiscal drainers.

He said: “We are aware of the current fiscal situation of the country, especially the issues of subsidies and the fact that subsidy now has reached N4 trillion and the decision of the government to discontinue subsidy funding by the middle of next year.

“Recent economic recessions negatively impacted revenue collection efforts amidst expectations for higher spending to reflate the economy, protect vulnerable individuals and businesses, and restore growth. In addition, the incidence of COVID-19 requires significant additional spending to address the health challenge.

“As expected, the federal government could not be bullish with the implementation of its revenue growth initiatives during these periods. In effect, the two recessions we recently had, significantly compounded the systemic problem of government revenue mobilisation.

“At 8 per cent of our tax to GDP ratio, this is very low, compared to our peers. The ratio of various components of government revenue to GDP indicates the capacity to do a lot more to improve our fiscal space. 

“The government’s target over time is to increase the revenue-to-GDP ratio to 15 per cent by 2025. Tax rates and compliance ratio are also significantly higher in comparison countries. For instance, Nigeria’s VAT is the lowest in Africa, and less than 50 per cent of the average rate.

“To compound matters, the country has technically been at war with pervasive security challenges across the nation. This has necessitated massive expenditure on security equipment and operations.”

Despite budget constraints, according to him, provisions are yet to be made by the federal government for personnel overhead and capital cost of federal health institutions. Most federal health institutions have also been permitted to spend their IGR. He said the sector is also prioritised in the release of funds.

He added that the federal government “is currently implementing revenue collection and expenditure management reforms. As government revenue mobilisation efforts yield more results over time, we hope that the current fiscal constraints will ease to allow for greater public health sector investment.”

The director-general restated its commitment to financing Universal Health Coverage (UHC) in Nigeria through the allocation of N1.1 trillion to the health sector in the proposed 2023 budget.

The difference represented a 33 per cent increase from N823.5 billion allocated to the sector in 2022, even as it says inadequate funding and fiscal drainers such as recession, and unsustainable payment of subsidy were responsible for the poor funding of the sector.

He explained that significant growth in revenues would guarantee an increase in health sector allocation and direct addition to the basic healthcare provision funds.

“The federal government remains committed to the provision of effective healthcare services and the various commitments to the sector in general, the commitments on the basic healthcare provision fund, and the allocation to primary healthcare services.”

The director-general explained that the federal government’s budget for the health sector “has more than doubled over the past five years. Allocation to the sector was increased by 170 per cent from N305.1 billion in 2016 to N823.5 billion in 2022 and further by 33 per cent to N1.1 trillion in 2023.

“This figure is exclusive of health-related expenditure in other MDAs and grants, which are health-heavy. Allocation to agriculture and WASH (Water, Sanitation and Hygiene) sectors follows a similar pattern.

“With this, you will see that the strategy of the government is to significantly increase allocation to the sector and also take into consideration the need to improve spending on agriculture, promote food security and nutrition, and increase allocation to the environment to improve sanitation, to increase allocation to water resources to ensure that we can promote the health of the people.

“If you allocate more resources to WASH sectors, you will be able to prevent the outbreak of diseases. A dedicated line was also created in the service-wide vault in the Federal Government budget for ease of administration.

“The line has consistently been funded as required and the government remains committed to contributing 2/3 of a total expenditure of $3 billion, from remains committed to contributing two-thirds of a total expenditure of $3 billion, from 2018 to 2028.

“In addition, the funds earmarked for the basic healthcare provision fund has been made in statutory transfer from 2021, for more effective implementation.”