The federal government says it will use $2.2 billion of the fund raised via eurobond to cater for petrol under-recovery costs.
The government said it would also target more local borrowing in 2022 to fund subsidy payments.
In September 2021, Nigeria raised $4 billion through eurobond issuance.
Subsidy or under-recovery is the underpriced sales of premium motor spirit (PMS), better known as petrol.
Zainab Ahmed, minister of finance, budget, national planning, disclosed this while speaking with Reuters on the sidelines of an Arab-African conference in Cairo.
Ahmed said Nigeria would not tap the eurobond market this year.
“Rising oil prices have put us in a very precarious position … because we import refined products … and it means that our subsidy cost is increasing,” she said.
The minister said that the government was working with lawmakers to boost revenues and that the rise in oil prices means that borrowings will increase more than planned.
Oil prices have been on the rise following Russia’s invasion of Ukraine.
This has raised petroleum landing cost, thus widening market price and actual cost per litre.
For Nigeria, high oil prices mean high subsidy payments for the government to sell petrol below the international market rate.
The country depends almost entirely on imports to meet its domestic gasoline needs, even though it is a crude oil exporter. It is also facing shortages after recently importing off-spec petrol.
The government had planned to stop subsidy payments on petroleum products from July this year — but reversed its decision in January, extending it by 18 months instead.
It budgeted about N3 trillion for petrol subsidy in 2022.