The National Economic Council, on Thursday, in Abuja, asked the Federal Government to put the June deadline for petroleum subsidy removal on hold, pending the review of existing plans to provide palliatives for Nigerians.
While arguing that the petrol subsidy should not be removed now, the council said the Federal Government would broaden consultations with state governments and other key stakeholders such as labour unions, petroleum marketers, the Ministry of Finance, Nigerian Upstream Petroleum Regulatory Commission and representatives of incoming administration.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed this to State House correspondents shortly after the valedictory NEC meeting presided over by Vice President Yemi Osinbajo at the Council Chambers of the Presidential Villa, Abuja.
She said there might be a need to send a supplementary budget to the National Assembly if the incoming administration aligned with the decision to extend subsidy removal.
According to Ahmed, the Council has, however, agreed that the subsidy must be “removed now, rather than later,” as the nation cannot afford it anymore.
Asked whether the council discussed the $800m World Bank loan and if there were other palliatives, the minister said: “On the issue of the $800 million so far, what we have is that $800 million that has been secured. We’re hoping that with removal of fuel subsidy, the savings that removal will cause to the Federation, federal government and states themselves will be able to provide further measures from this increased revenue that will accrue to the Federation account.”
However, the NEC argued that the subsidy should be removed in a way that does not worsen hardship.
Successive administrations in Nigeria have failed to cut or completely remove the subsidy, a socio-politically delicate matter in Africa’s largest economy.
Between January and September 2022, the Federal Government said it spent $7.5bn on fuel subsidy, describing it as an inefficient use of resources stifling Nigeria’s economic potential.
“While the removal is highly desirable and the way to go in order to save the country from the continuous funding of inefficiency and consumption, the social economic impact on Nigerians cannot also be overlooked”
On April 12, 2023, the International Monetary Fund asked Nigeria to cut borrowing, raise revenue by increasing taxes to grow its economy at 3.2 per cent in 2023.
With a tax-to-GDP ratio of eight percent, Nigeria ranks among the lowest globally, as its total debt stock is predicted to hit N77tn by May end.
The Nigerian government has, for decades, subsidized fuel and fixed retail prices of petroleum products. The payment has, however, threatened the nation’s fiscal position and impacted the government’s ability to fund developmental projects across the nation.
In November 2021, the Federal Government announced its plan to remove the fuel subsidy and replace it with a monthly N5, 000 transport grants for poor Nigerians.
But the government later suspended the plan after the Nigeria Labour Congress and Trade Union Congress threatened to embark on mass protests.
In February, the International Monetary Fund urged the Nigerian government to deliver on its commitment to remove fuel subsidies by mid-2023.
The Washington-based lender in a report titled ‘IMF Executive Board Concludes 2022 Article IV Consultation with Nigeria’ urged the authorities to deliver on their “commitment to increase well-targeted social spending.”
Despite rising oil prices, the IMF said, the government’s fiscal deficit is estimated to have widened further in 2022, mainly due to high fuel subsidy costs.
The NEC’s decision has revealed that the Federal Government lacks the political will to do the needful and end fuel subsidy for the better.
On several occasions, interest groups as well as economists and financiers across the country had advised the government to bite the bullet and end a subsidy regime that has significantly damaged the economy.
This is a decision that should have been taken long ago. The government in its last days has repented and becomes aware that Nigerians have been suffering.
It is our opinion that this period should give the government the time to restore the nation’s refining capacity. This suspension should give the government an opportunity to decide on a timeline-based road map to restore our refining capacity. That is the only thing Nigerian masses are looking forward to and nothing else.
We align with the majority of Nigerians that the issue of petroleum subsidy removal should be left to the incoming government to handle.
This should be the default position since the current government has announced a budgetary provision for fuel subsidy up till June 2023. This is also the position of the Petroleum industry Act as amended. Rather than stir another round of controversy and confusion, the matter ought to be left for the new administration. The NEC announcement was really unnecessary.
The expectation is that the new administration should have its strategy of managing the policy transition.
This should not be preempted by the current administration. The NEC should avoid making policy pronouncements that may create problems for the new administration.
We expect some level of informal consultations between the transition team of the incoming administration and key stakeholders on the matter.
The APC had categorically stated that it would remove petrol subsidy on assumption of office, although it had not unveiled its strategy of doing so.
We urge the Federal Government to use the period of the suspension to complete the turnaround maintenance of the Port Harcourt and other refineries.
While the removal is highly desirable and the way to go in order to save the country from the continuous funding of inefficiency and consumption, the social economic impact on Nigerians cannot also be overlooked.
The time extension should be used to mobilize national consensus, fix the refineries and tidy up the operational framework that will ensure that the country never returns to the subsidy regime.