After $800m palliative, FG suspends subsidy, cites wrong timing

After $800m palliative, FG suspends subsidy, cites wrong timing
Vice President, Yomi Osinbajo


• New government may spend N3.5 trillion in supplementary subsidy budget
• MOMAN says incoming government best to plan, implement subsidy removal
• Lawal, others laud suspension of subsidy removal
• We’ll study it first before taking position, says Oyo TUC

Despite spending over N10 trillion in less than two years and opting for a loan of $800 million as palliative, the Federal Government, in a volte-face, made a joke of its initial plan to remove petrol subsidy when it yesterday, put the plan on hold barely a month to the proposed June take-off.

The National Economic Council (NEC), presided over by Vice President Yemi Osinbajo, on Thursday, said the timing of the subsidy removal should not be now, adding that the new administration will address the contentious matter when it comes on stream May 29.

Briefing newsmen after their valedictory session in the State House, Abuja, Minister of Finance, Budget and National Planning, Zainab Ahmed, 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 post-subsidy that needs to be planned for and subsequently put in place and also what needs to be done to support the people that would be most affected as a result of the removal.

“Find in your mind that the budget for 2023 has provision for subsidy only up to June and the Petroleum Industry Act has a provision that requires that all petroleum products must be deregulated 18 months after the effective date of the PMS removal.

“We agreed to form an expanded committee looking at the process for the removal including determining the exact time and the measures that need to be taken to provide support to the poor and the vulnerable and then also the alternatives that will be put in place, including ensuring that there is sufficient supply of petroleum products in 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 have to be engaging with Labour and with petroleum marketers. The immediate committee comprises the Finance Ministry, the NNPC, the regulator and the downstream upstream regulator.

“We will be working together with representatives of the state, we will have a plan that we will start working on putting the building blocks towards the eventual removal of the fuel subsidy.”

Recall that the Minister of State for Budget and National Planning, Clem Agba, had last month, disclosed that the Federal Government was yet to harmonise its efforts with states to provide palliatives to cushion the effect of subsidy removal.

According to him, a committee led by the Vice President and NEC, comprising governors, the governor of Central Bank of Nigeria (CBN) and other co-opted government officials, had been working to resolve the issue for over 12 months with no clear roadmap on the issue.

With yesterday’s suspension, the country may require another N3.5 trillion to finance the Premium Motor Spirit (PMS) subsidy scheme, which was initially outlawed by the Petroleum Industry Act (PIA) but reinstated by President Muhammadu Buhari.

Executive Secretary of the Major Oil Marketers of Nigeria (MOMAN), Clement Isong, said the incoming government, which had promised to remove subsidy, is in the best position to plan and implement the removal.

“It is a reasonable thing to do. We know that the new government has said they will remove subsidies. The removal has to be done properly and the new government is in the best position to plan it for accountability and transparency,” Isong said.

He urged the new administration to embark on proper consultation to avoid a flop in the implementation. Director of the Centre for Promotion of Private Enterprises (CPPE), Dr. Muda Yusuf, in his reaction, said: “My view is that all matters relating to petrol subsidy removal should be left for the incoming administration 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 PIA 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.

“My 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. I also expect that some level of informal consultation should have commenced between the transition team of the incoming administration and key stakeholders on the matter. The ruling All Progressives Congress (APC) had categorically stated that it would remove petrol subsidy on assumption of office though it has not unveiled its strategy of doing so.”

Media had on Thursday reported that the current administration, which had set a date for subsidy removal and had already taken a loan for palliative measures, had no proper plan on how it expects to deal with the market and the import side of the new markets.

Energy expert, Henry Adigun, had said the country would experience serious economic catastrophe and challenge if the new government adheres to removing subsidy on petrol as planned by the ongoing administration.

“I do not think the subsidy removal will be immediate on handover. That would cause a significant economic crisis and social disruption. The challenge will not be limited to supply. There will also be potential for extortion of Nigerians.

“The best approach for Bola Tinubu is to set up a transition process. Supported by a phased withdrawal and good stakeholders’ engagement,” Adigun said. Energy Economist, Prof Wunmi Iledare told The Guardian that the suspension did not come as a shock.

“I am not surprised. Petroleum subsidy removal decision is a transferable problem like kicking a soccer ball. It is foolish to expect a government who did nothing about subsidies since 2015, to suddenly wake up with less than forty days to go act on subsidy,” Iledare said.

According to him, the Buhari government ranks the highest when it comes to making political expediency to trump economic efficiency in nearly every judgment and value-added decisions.

He advised the incoming administration to begin with a partial deregulation through a periodic price modulation framework for government assisted and designated retail stations and market-based pricing for all others for six months before full deregulation.

The Director of the Centre for Petroleum, Energy Economics and Law (CPEEL) at the University of Ibadan, Prof. Olusanya Olubusoye, and the convener of All Workers’ Convergence (AWC), Andrew Emelieze, yesterday, supported the suspension the implementation of fuel subsidy by the Federal Government.

Speaking with media source in Ibadan, Olubusoye and Emelieze maintained that the decision is better left for the incoming administration to take. The CPEEL director said: ‘’It is the right thing to do. This is coming at the tail end of this administration. The administration will not be able to contain the fallout of the policy. The burden will be transferred to the incoming administration.  It can destabilize the inauguration if it is not well managed.

“It is best for the administration to decide the strategies to be adopted. Whoever is going to implement subsidy removal must be prepared for it. There must be something to cushion its effects. There is a need to assess the security and risks associated with subsidy removal.”

Emelieze, a labour leader, said the outgoing government could not take decisions for the incoming government, saying it should be better handled by the incoming administration.

Meanwhile, the Oyo State chairman of Trade Union Congress (TUC), Olatunbosun Olabiyi, in his reaction, said: ‘’We are going to study it and come out with a statement on it. The government is winding down and they are leaving it for the incoming administration.”

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