President Muhammadu Buhari cited a spike in oil prices, made worse by Russia’s invasion of Ukraine in February, and a drop in crude production in the country.
With rising oil prices, gasoline subsidies had been estimated to cost up to $7 billion a year.
“The decision to suspend the gasoline subsidy removal at a time when crude oil prices are high has increased the cost of the subsidy,” Buhari said in the letter seen by Archyde.com.
Buhari asked lawmakers to raise the benchmark oil price from $62 to $73 a barrel in 2022, cut planned crude production from 283,000 barrels a day to 1.6 million, and cut the cost of upstream projects funded by the federal government.
He increased funds for police forces to “boost their morale as they grapple with heightened security concerns in the country.”
In January, the Nigerian government reneged on its promise to end its grants then, and instead extended them for another 18 months to avoid protests ahead of presidential elections next year.
But the price of oil has skyrocketed. The West African country relies almost entirely on imports to meet its domestic gasoline needs, even though it is a crude oil exporter.
The budget deficit is expected to reach 7.35 trillion, or 3.99 percent of GDP, Buhari said, and this increase will be financed by new borrowing from the domestic market.
The deficit was initially set at 3.42% of GDP.
Nigeria raised $1.25 billion in Eurobonds last month, at a premium to similar maturities, as it sought to find cash to fund its costly gasoline subsidy program in the face of limited oil revenues.
(1 $ = 415,15 naira)