The Federal Government has said it plans to cut subsidies on petroleum products by half next year after sharp falls in global crude prices, spurred a reversal of its 2015 budget downwards.
President Goodluck Jonathan submitted the revised budget figures to lawmakers last week, proposing to spend 458.68 billion naira ($2.59 bln) on petrol subsidy in 2015, down from 971.14 billion naira presented for 2014.
It also assumed further cuts to petrol subsidies in 2016 to 408.68 billion naira and 371.18 billion naira for 2017.
The Minister of finance and Co-ordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala has proposed lowering the assumed benchmark oil price for the 2015 budget to $73 per barrel from the $78 proposed in September, after global crude prices collapsed.
Ngozi Okonjo-Iweala told Reuters last week that declines in the price of oil, which has lost almost 30 percent since July, would impact the economy, requiring the government to cut non-essential spending and raise more revenues.
Recall that the FG tried to end subsidy in 2012 in efforts to cut government spending and encourage badly needed investment in local refining, doubling the price of a litre of petrol overnight to about 150 naira ($0.93) from about 65 naira.
The budget proposals assumed an exchange rate of 162 naira to the U.S. dollar for 2015, weaker than 160 naira assumed for 2014. It expects the naira to weaken further to 163.50 in 2016, reaching 165 in 2017.