On Thursday in Abuja, the National Economic Council requested that the Federal Government postpone the June deadline for the elimination of fuel subsidies while it reviews current plans to provide palliative care for Nigerians.
The council claimed that the Federal Government would broaden consultations with state governments and other important stakeholders, such as labor unions, petroleum marketers, the Ministry of Finance, the Nigerian Upstream Petroleum Regulatory Commission, and representatives of the incoming administration, while still arguing that the gasoline subsidy should not be eliminated at this time.
The removal will be “assessed to see if it can be completed by June as planned,” according to this “expanded committee,” it stated.
If the new administration agreed with the decision to extend subsidy elimination, she suggested it might be necessary to propose a supplemental budget to the National Assembly.
However, Ahmed claims that the Council has decided that the subsidy must be “removed now, rather than later,” as the country can no longer afford it.
“Council agreed that the timing of the removal of fuel subsidies should not be now; however, that we should continue with all of the necessary preparations, and that these preparations must be done in consultation with the states and other important stakeholders, including representatives of the incoming administration,” she said.
“Council agreed that the fuel subsidy must be removed earlier rather than later because it is not sustainable. We cannot afford it anymore. But we have to do it in such a way that the impact of the subsidy is as much as possible, mitigated on the lives of ordinary Nigerians.
“So, this will require looking at alternatives to the fuel subsidy that needs to be planned for and subsequently put in place. But also, what needs to be done to support the people that will be most affected as a result of the removal.”
She pointed out that only up until June 2023 is covered by the subsidies in the 2023 budget. Furthermore, the Petroleum Industry Act’s provisions mandate the deregulation of a number of industries 18 months after the date on which the subsidy removal took effect.
She explained that as a result, the Federal Government has consented to establish an extended committee to review the removal procedure. This includes figuring out the precise moment, the steps to take to protect the weak and vulnerable, and making sure there is a sufficient supply of petroleum products across the country.
“So this is a decision that has been taken to expand the committee that is currently working with representatives of the states and it will also have to be engaging with the petroleum marketers.
“The immediate committee comprises the Ministry of Finance, Budget and National Planning, the NNPCL, the regulator, and the downstream and upstream regulators.
“So there’ll be an expanded committee so that it is not just a few people’s thoughts that will guide the process so that there is sufficient consultation taking inputs from key stakeholders on the measures that need to be taken. What I said is that it is not going to be removed now, which means it will not be removed before the transition is completed,” Ahmed said.
According to the minister, the country would now have “two laws in the oil sector.”
She clarified that, depending on their decisions on the fuel subsidy, the new administration would need to alter the PIA as well as the Appropriations Act to bring them into compliance with the reality of the present.
Therefore, Ahmed explained, “the work plan will be created to leave in June if the committee’s work, which will include the representatives of the incoming administration, determines that the removal can be done by June. However, if it is decided that the time period needs to be extended, it will require that the country review the Appropriation Act, for example, as the 2023 budget only made provisions through June. Therefore, if we extend past June, we will need to review the Appropriations Act and amend the bill as well as the PIA.
“These are the reasons why we had to do this consultation with NEC to get input from the governors. They’re going to provide to us their representatives to work together with us to have a defined process that will take us towards the removal. But one thing that is clear is everybody agreed that the subsidy should be removed very quickly, because the cost is only not efficient, but is also not sustainable. And that when the time comes for removal, the removal will be done once and for all.”
A socio-politically sensitive issue in the biggest economy in Africa, the subsidy has not been reduced or eliminated by successive administrations.
The Federal Government reported spending $7.5 billion on fuel subsidies between January and September 2022, calling it an ineffective use of resources that limits Nigeria’s economic potential.
The International Monetary Fund requested Nigeria to reduce borrowing and raise money by raising taxes on April 12, 2023, in order to grow its economy by 3.2% that year.
Nigeria has one of the lowest tax-to-GDP ratios in the world at 8%, and by May 31 total debt is expected to reach N77 trillion.
The NEC countered that the subsidy should be eliminated in a way that doesn’t make things more difficult.
This necessitates looking at fuel subsidy alternatives that must be planned for and later implemented, as well as what must be done to lessen the impact of the elimination, according to Ahmed.
“On the $800m, the Minister stated that “So far, what we have is that $800m that has been secured and intact. Again, that is a matter for discussion. The states may have their own plans, they may want to have their own designated programmes different from what the federal government may want to do.”
Workers wages eroded
The Federal Government has received praise from the Nigerian Labour Congress for the 40% pay hike for the nation’s civil servants.
This was one of the decisions that the NLC’s National Administrative Council adopted at its conclusion.
This information was provided to one of our journalists on Thursday in a statement that was jointly signed by the NLC’s President, Joe Ajaero, and Secretary-General, Emmanuel Ugboaja.
“We commend the federal government on its recently announced salary award decision to public servants in the country,” the statement said in part.
“This we are sure is in recognition of the extent to which its policies of the last
two years have caused hyperinflation in the country and deeply eroded the real wages of Nigerian workers.”
The NLC also issued a warning to state council members not to defend governors who abuse employees in their states.
Experts react
This, according to Dr. Ikenna Nwosu, a facilitator with the Nigeria Economic Summit Group, would continue to feed inflation.
“It was a campaign promise of the President, he campaigned on the basis of that. So, he is supposed to implement it during his regime. Why is he moving to another government and asking them to implement it. One of the implications is that it will continue to affect our credit risk rating by the rating agency and continue to spiral inflation.” he said.
In a separate speech, Mr. Wale Oyerinde, Director-General of the Nigeria Employers’ Consultative Association, asked the Federal Government to use the time of the suspension to finish the turnaround maintenance of the Port Harcourt refinery.
“NECA noted the suspension of the anticipated subsidy removal and urged the government to use the period of suspension to complete the TAM of the Port Harcourt and other refineries,” he added.
“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.”
In contrast, Gabriel Idahosa, the deputy president of the Lagos Chamber of Commerce and Industry, criticized the Federal Government for lacking the political will to take the necessary action and effectively stop gasoline subsidies.
Idahosa stated that the administration has received advice to bite the bullet and remove a subsidy regime that has seriously hurt the economy from interest organizations like the LCCI as well as economists and financiers from all over the nation on several occasions.
Akpan Ekpo, a professor of economics at the University of Uyo, stated in a separate interview with The Spectator that the decision to end fuel subsidies was ill-considered and would cause suffering Nigerians to endure hardships never before experienced.
Ekpo said, “I’m not surprised, because I’m one of those people who said they should not remove subsidies until certain things are done. We have four refineries that are not working. Let the refineries start working. When they start working, we will be sure of the supply side. If they are not working, let us know why, or sell them off.”
The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture’s President, John Udeagbala, stated that “while the chamber is not against the removal of subsidy, it is concerned about the impacts of the subsidy removal on businesses which are already burdened with so much economic pressures and difficulties, leading to the shutdown of many SMEs and more unemployment” during a press conference on the country’s quarterly economic outlook.
