ON the heels of postponement of fuel subsidy removal, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the Lagos Chamber of Commerce and Industry (LCCI) and other industry stakeholders have proposed phased removal of the subsidy.
This, they said, would be accompanied with wider consultations with several stakeholders.
Director General of the LCCI Chinyere Almona, in a statement, said: “While we support the full implementation of the Petroleum Industry Act (PIA) 2021 and the total deregulation of the oil and gas sector, we are not insensitive to the plight of the masses that may feel the pains of some of the provisions like the removal of fuel subsidies.
“Since the announcement of the planned removal of fuel subsidies, there have been numerous reactions expressing displeasure and readiness to stage protests against the planned action.
“In the face of this dilemma, we recommend that the removal is phased and with a complement of heavy investment in critical infrastructure that supports production in the economy.”
Professor of Financial Economics at the Department of Economics of the University of Lagos, Nigeria, Ndubuisi Nwokoma, who spoke in a monitored Broadcast on Arise Television on Wednesday, urged the Federal Government to embark on phased removal of subsidy removal.
He stated that the effects would not be highly felt by Nigerians if the government embarked on phased removal of the fuel subsidy, considering rising borrowing challenges.
The Federal Government has expressed concerns about the unsustainable subsidy payment, which has become a strain on its revenue.
The presidency, on Wednesday, said Nigeria would have to pay a price for continuing to subside premium motor spirit (PMS), popularly called petrol, adding that the country might be left with no other choice than to continue borrowing to shoulder its overheads.
The president’s Special Adviser on Media and Publicity Femi Adesina said this when he featured on Channels Television’s Sunrise Daily programme.
PMS is not deregulated by the Federal Government as the price is sold at between N162 and N165/litre at filling stations – far lower than the actual cost of the commodity.
Analysts say the government has shot itself in the leg with wastage of an opportunity of rising oil price to shore up its excess crude account or remove subsidy
Cruds oil price was $88.89 per barrel on Wednesday.
In June 2021, the Group Managing Director of the Nigerian National Petroleum Company Limited Mele Kyari had stated that petrol price should be more than N280/litre, though the commodity had been subsidised and sold at N162/litre.
Following planned industrial action by the Nigerian Labour Congress, the Muhammadu Buhari-led administration suspended the planned removal, as it proposed an 18-month extension plan for subsidy payment.
Meanwhile informed analysts say in the ligh of Federal Government decision to continue subsidising petrol, the NNPC might deduct over N1 trillion in the next six months from the Federation Accounts Allocation Committee.
A professor of Law and Public Sector Analyst Sam Amadi, while speaking on the development, said the suspension of the policy must offer Nigeria an opportunity to play the way the market wanted it to play and not fix prices.
“There are issues that must dominate our discussions in this suspension. For instance, which model of pricing are we looking at? Are we going to find a model of having a price band or fixed price as we saw recently with the National Economic Council proposing N302 per litre or model subject to market forces?”
He stressed that there was still shoddiness in Nigeria’s deregulation journey.
Also commenting, Director General of NACCIMA Ayo Olukanni said: “We acknowledge the government’s dilemma and difficulties for an enduring solution to the issue of removal of petroleum subsidy, especially the prices of PMS.
“This decision to move the date and suspend subsidy removal beyond June is therefore not surprising. While it appears as kicking the can down the road again, it is a welcome development.
“It is absolutely necessary to consider a practical and acceptable implementation plan in the quest to gradually wean the public off petrol subsidy and cushion the impact with appropriate palliatives. This can only be done in consultation with organised labour and other stakeholders including the private sector.
“Government is therefore encouraged to widen consultations on the issue and work out an implementation plan which will fully reflect input from the widest range of stakeholders and be acceptable to all.”