FG insists, fuel subsidy will end in June

The federal government is proceeding with the planned removal of fuel subsidy by the end of June, contrary to reports on Thursday that the exit date for the subsidy removal had been put on hold.

The Federal Ministry of Finance, Budget and National Planning declared yesterday that there has been “no change in the overall policy direction regarding the petrol subsidy envisaged by June 2023.”

What happened, according to the Special Adviser Media and Communications to the Minister of Finance, Budget and National Planning, Yunusa Tanko Abdullahi, was that the subsidy removal committee needed to be expanded to include teams from the incoming administration and the state governors.

“By the principles and letters of the 2023 Appropriation Act and the PIA laws, there is no provision for subsidy after June 2023,” Abdullahi said.

He said that some members of the incoming government were “brought into the National Economic Council (NEC) meeting (on Thursday) so as to consolidate on that decision of fuel subsidy removal.”

The Minister, Mrs. Zainab Ahmed, had told reporters after the NEC meeting that the council “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.

The council, she said, “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.”

The Subsidy Removal Committee currently comprises representatives of 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 and the Petroleum Industry Act (PIA) have made provisions for the termination of fuel subsidy by June 2023.

The committee is to work out a road map for the removal of the subsidy.

The issue of fuel subsidy removal is a complex and controversial one in Nigeria.

It has been widely agreed that there is no universally accepted answer to what the government needs to do before removing the subsidy.

However, the Buhari government has been considering some measures to take before removing fuel subsidy.

One of the key prerequisites for fuel subsidy removal is the deregulation of the downstream sector of the Nigerian petroleum industry. Deregulation means that market forces and not government will determine the price of petrol and other petroleum products.

This has been achieved half way with the partial implementation of Petroleum Industry Act (PIA).

Fuel subsidy removal will lead to an increase in the price of petrol and other petroleum products with attendant rise in the cost of living of Nigerians.

The government says it has put in place adequate social safety nets such as cash transfers or subsidies for the most vulnerable segments of the population, to cushion the effect of the removal of fuel subsidy.

Recently the government secured an $800 million loan from the World Bank to be paid back in June, 2051. This money has been earmarked to be disbursed as a social safety net (palliative) for 50 million poor Nigerians.

Nigeria, despite being a major oil producer, still imports a significant amount of refined petroleum products due to the poor state of its refineries.

The Nation