In addition to the N656.3bn allocation for this year, the Federal Government had also provided N231.8bn in the budget for the payment of the 2011 subsidy arrears, adding up to N888.1bn.
Speaking to the Reuters Africa Investment Summit in Abuja on Thursday, Sanusi said: “With oil prices where they’ve been since the beginning of the year, I’m sure that we will be exposed to that amount long before the year runs out.”
“If I was asked for advice, I’d simply say pay what you have in the budget and simply stop paying. If not, take the money from the Excess Crude Account or you’ve got to borrow money,” he added.
Although the pump price of petrol is currently N97 per litre, the landing cost of a litre of imported petrol is N152.44, leaving the government to pay about N55.44 on every litre of petrol as subsidy.
When the N55.44 per litre is multiplied by a daily consumption of 35 million litres, it amounts to a daily subsidy expenditure of N1.94bn. The figure adds up to N60.14bn monthly.
The country is supposed to save money over a benchmark price, which is $72 a barrel in the 2012 budget, into an excess crude account to cushion the economy against potential oil price shocks.
But the account has been repeatedly raided by politicians, and despite record high oil prices, it contained only $3.5bn earlier this year, down from some $20bn in 2007. It won’t last long if subsidy payments overshoot.
The country’s total debt is about 20 per cent of Gross Domestic Product, which is comfortable compared with other African countries, but, Sanusi argues it is poor for a country pumping as much oil as Nigeria.
Debts are rising despite high oil revenue and economists are concerned that borrowing is increasingly internal, which means from banks and pension funds. If the government fails to pay, then other parts of the economy are at risk
The nation relies on crude exports for more than 80 per cent of government revenues and budgets for this amount based on the benchmark oil price and assumed production, which was set at 2.48 million barrels per day this year.
This is at the top-end of actual production last year and if there are any output shortfalls, which have been common in the past, the government will have to borrow to cover any shortfall.
Sanusi said, “(The output) assumption was too optimistic … based on the most rosy forecasts of operating environment.
“When you’ve got militancy, you’ve got production shortages, you’ve got natural operational failures, a more conservative output figure to begin with would have been better.”
High oil prices have enabled the economy to grow at more than seven per cent a year but poverty is rising.
President Goodluck Jonathan pledged before his election last year to improve the country’s woeful electricity system by privatising the power sector and to reform the oil sector so as to weed out corruption and save the indebted Nigerian National Petroleum Corporation.
The ambitious Petroleum Industry Bill, PIB, which is supposed to change everything from taxes to the structure of the NNPC, has been stuck in parliamentary dispute for years.
Reforms are running months behind schedule and risk being blocked off by politicians who benefit from the status quo.
“Clearly, we should have made much more progress than we’ve made. The PIB is a major disappointment … after several years (it) is about to start again its tortuous path through the National Assembly. In many of these areas, you’ve clearly got vested interests,” Sanusi said.