This was a question put up on twitter recently. I and some other handles (twitter users) consulted endlessly and checked every available line in the 2010 budget and never found a thing. It was a damning revelation as it went contrary to every opinion and norm that the fuel subsidy was indeed enshrined in the budget. This opinion became even more acceptable when just last week, the press was agog following the president’s budget which obviously did not include fuel subsidy for 2011. Ironically, the Minister of Finance recently debunked claims that the subsidy had been removed and that the president was still consulting widely before it will be removed. Even at that, people still claim the subsidy was deliberately removed in the budget when indeed it was never supposed to be there. So where then is the subsidy funded from?
As far as I am concerned the fuel subsidy is funded directly from the Federation Account and thus never passes through the Federal Budget. The cost of fuel subsidy is therefore shared by both the states and the federal government. The Federation Account as depicted in the Federal Allocation Report (see the last line for subsidy) for September 2011. The federation account by law is an account where all the revenues accruing the the entity called Nigeria is deposited. Revenues include oil revenues, taxes, levies and duties, dividends from government investments, internally generated revenues etc. Every month the Minister of Finance shares the money in accordance with the constitution. The Federation Account is debited with allocation to the FG, States, Local Government Councils, 13% derivation funds, Cost of collecting taxes and excise duties, excess crude account and of course SUBSIDY. No wonder the state governors all support the removal of fuel subsidy because removing it has the potential of increasing their share of the Federation Account.
But then they must have appropriated for subsidy yearly. The question is where? I do not know yet and if you do kindly let me know. But as far as I am concerned it is not in the budget.