The issue of fuel subsidies has not ceased to elicit so many reactions from Nigerians. The latest pronouncement and clarification by the government has further fuelled suspicion about the motive for the government’s action, especially in its twilight; BENJAMIN UMUTEME writes.
There was surprise across the length and breadth of the country when the federal government announced that it was suspending the funding of fuel subsidies. The government stated that there was the need for more time to prepare for the eventual removal of the subsidy.
Addressing journalists, after the National Economic Council meeting in Abuja, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said the Council agreed on the need for continued discussions on the issue, adding that the federal government, together with states and representatives of the in-coming administration, required more preparatory work.
She had said, “Council agreed that the timing of the removal of fuel subsidy should not be now. But that we should continue with all of the preparatory works that need to be done and that this preparatory has to be done in consultation with the states and other key stakeholders including representatives of the incoming administration.
“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.”
Volte face
In a twist to the whole subsidy issue, as early as 7:45an, Ahmed in a 360 degrees turnaround said the report indicating that it had discarded the action was not true.
The Special Adviser, Media & Communications to the minister, Yunusa Tanko Abdullahi, in a statement he issued to journalists, said contrary to reports, the planned removal of fuel subsidy has not been suspended, rather it expanded the subsidy removal committee to include teams from the incoming administration and state governors.
According to the statement, the decision had to be taken to make the committee all inclusive.
“The Honourable Minister of Finance, Budget and National Planning, Mrs. Zaniab Ahmed, stated this in Abuja on Thursday, shortly after the National Economic Council (NEC) meeting, chaired by the Vice President, Prof. Yemi Osinbajo.
“She said that NEC deliberated on the issue extensively and came to the conclusion that the subsidy must be removed as it is not sustainable, but there is a need for further consultations, especially the need to involve members of the incoming administration and representatives of the state governments.
“Mrs. Ahmed also said we agreed to form an expanded committee that will be looking at the process for the removal of the subsidy, including determining the exact time as well as the measures that need to be taken to provide support to the poor and the vulnerable. There is also the need to agree alternative measures that will be put in place to ensure that there is sufficient supply of petroleum products in the country.
“According to the Honourable Minister, the Subsidy Removal Committee currently comprises the Ministry of Finance, Budget and National Planning, Ministry of Petroleum Resources, Nigerian National Petroleum Company (NNPC) Limited, the downstream and upstream regulators, Central Bank of Nigeria (CBN) and the Chief Economic Adviser to the President.
“Mrs. Ahmed stated that the 2023 Fiscal Framework and Appropriation Act as well as the Petroleum Industry Act (PIA) have made the provision that the government should exit fuel subsidy by June 2023. The committee is to work out a road map for the removal of the subsidy. No change in the overall policy direction regarding the petrol subsidy is envisaged by June 2023,” the statement read.
Long-term benefits
Speaking with Blueprint Weekend on his view, a professor of Finance and Capital Market, Uche Uwaleke, said the economy would benefit more in the long-run from subsidy removal.
He said: “As much as the removal of fuel subsidies will impact the economy positively in the long run, including opening up the downstream sector of the oil industry for more investments and job opportunities, I think it should be left to the incoming administration to deal with. This is in view of the fact that the level of stakeholders’ engagements as well as the compensation measures required to cushion the adverse impact of subsidy removal have yet to be put in place.
“On the issue of the $800 million World Bank facility the federal government has secured in connection with the subsidy removal, my advice is that rather than distribute the money to a number of households, the government should, after consultation with organised labour and other critical stakeholders, apply the concessional facility to areas with long lasting impact such as education, health, and sustainable jobs.”
Impacting the under-employed
In his opinion, an economist, Taiwo Oyedele, said fuel subsidy removal would impact those that were under-employed the most. According to him, with the prices of goods and services on the rise due to subsidy removal, wages will not rise correspondingly.
He said, “The Nigerians that will be most impacted by petrol subsidy removal are not the poorest people in villages, it is the employed, low wage earning urban poor who have to commute to work daily spending a significant portion of their income on transportation, barely having anything left for rent and food.
“The next category of vulnerable people that will be most affected are the micro business owners running their businesses on petrol powered generators.
“The rural poor have an infinitesimal touch point with petrol. They don’t own vehicles or generators. They trek to and from their farms, markets, schools etc. The less poor among them own bicycles while only a few privileged ones own motorcycles or any form of vehicle.
“So, the government needs to use empirical data to determine the most vulnerable Nigerians that will be most impacted by subsidy removal and design the appropriate cushion in a manner that is effective, sustainable and not prone to abuse or corruption like the proposed sharing of $800 million World Bank loan to 10 million households, mostly in the rural areas.”
Suspicious decision
Giving his thoughts on the issue, a public affairs analyst, Joe Nonso, said, “Removing fuel subsidy on the eve of your exit after wasting eight years gallivanting about, borrowing and incurring huge recurrent expenditure is unfair. Allow the in-coming government to work out modality to determine whether or not to retain and remove fuel subsidy.”
