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Soaring inflation, pressure force Nigerian govt to suspend subsidy removal

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CONCERNS over soaring inflation in the country and intense pressure from Nigerians have forced the Federal Government to suspend plans to remove fuel subsidy.

Minister of Finance, Budget and National Planning Zainab Ahmed announced the suspension of the plan on January 24 at a meeting with members of the National Assembly.

As a result of the development, the 2022 budget is to be amended to make provisions for further subsidy payment after June, when the government had already planned to terminate further funding of subsidies.


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Having announced that it was set to remove subsidy in 2022, the Federal Government had come under intense pressure from Nigerians, including the Nigeria Labour Congress (NLC), which threatened to embark on a nationwide protest from January 27.

The Trade Union Congress (TUC) has also directed its state chapters to commence mobilisation for industrial actions against petrol subsidy removal.

At the meeting with members of the National Assembly on January 24, minister of finance Ahmed admitted that the Nigerian government understood that removal of subsidy would worsen inflation in the country.

The latest consumer price index report, released by the National Bureau of Statistics (NBS), revealed that Nigeria’s inflation rate rose after eight months of consecutive decline in December 2021.

The inflation rate rose from 15.4 per cent in November 2021 to 15.63 per cent in December 2021.

There are concerns that cost of goods and services will rise astronomically in the event of the removal of petrol subsidy.

The minister noted that the removal of the subsidy would impose more hardship on Nigerians, a situation which she said President Muhammadu Buhari did not want.

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Consultations with stakeholders showed that the timing of the planned removal of subsidy was problematic, according to the minister.

Ahmed disclosed that while the government would continue consultations, measures would be put in place to address the rising cost of subsidy.

The measures include: improving the refining capacity of existing refineries in order to reduce the volume of petroleum imports.

Minister of Finance, Budget and National Planning Zainab Ahmed

Announcing the suspension of the plan, the minister said, “Provision was made in the 2022 budget for subsidy payment from January till June. That suggested that from July, there would be no subsidy.

“The provision was made sequel to the passage of the Petroleum Industry Act which indicated that all petroleum products would be deregulated.

“Sequel to the passage of the PIA, we went back to amend the fiscal framework to incorporate the subsidy removal.

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“However, after the budget was passed, we had consultations with a number of stakeholders and it became clear that the timing was problematic.

“We discovered that practically, there is still heightened inflation and that the removal of subsidy would further worsen the situation and impose more difficulties on the citizenry.

“Mr President does not want to do that.

“What we are now doing is to continue with the ongoing discussions and consultations in terms of putting in place a number of measures.

“One of these includes the rollout of the refining capacities of the existing refineries and the new ones which would reduce the amount of products that would be imported into the country.

“We, therefore, need to return to the National Assembly to now amend the budget and make additional provision for the subsidy from July 22 to whatever period that we agreed was suitable for the commencement of the total removal.”

Opposition to the planned subsidy removal heightened after reports emerged that an ad hoc committee of the NEC had recommended the hike of the fuel pump price to N302 per litre from February.

The NEC committee, chaired by Kaduna State Governor Nasir El Rufai, interfaced with the Nigerian National Petroleum Corporation (NNPC) on appropriate pricing of PMS in Nigeria.

The committee’s report was reportedly presented in November 2021. Vice President Yemi Osinbajo heads the NEC which has the 36 governors as members.

The current pump price for PMS is between N162/N165 per litre and the NEC committee stated that removal of subsidy, which would take the pump price to about N302 per litre, would enable the country to recover N3 trillion in revenues that would have been invested in paying for subsidies.

According to the NEC committee, subsidy was reducing transfers into the federation account by about N250 billion per month and could result in deductions of N3 trillion in 2022 if PMS subsidies were not eliminated.

The National Economic Council deliberated on the ad hoc committee’s report at the Presidential Villa Abuja on January 20 and announced afterwards that the final decision on the matter would be taken in June.

However, following the reports that the NEC committee had proposed a hike of the fuel pump price, the Trade Union Congress (TUC) directed its state chapters to commence mobilisation for industrial actions against petrol subsidy removal.

In a communique released after a meeting, TUC President Quadri Olaleye said the removal of subsidy would have an adverse effect on the masses.

Also, a former Military Head of State Abdulsalami Abubakar kicked against the planned removal of subsidy, warning that higher fuel prices would drive millions of Nigerians into poverty.

Earlier, the NLC had, at a meeting on January 11, directed its members, affiliate unions and civil society partners to prepare for nationwide protests against the planned removal of subsidy from January 27 to February 1.

The labour union also asked its affiliates nationwide to mobilise their members to ensure total compliance with the planned nationwide protests.

The Association of Senior Civil Servants of Nigeria (ASCSN) also opposed the plan, vowing that its members would resist the removal of subsidy.

The Nigerian Governors Forum (NGF), which has been championing the removal of subsidy with the hope of having more funds available for the state governments from the federation account, had said it would dialogue with the labour unions over the planned nationwide protests.

El Rufai, a major advocate of subsidy removal, had, at the presentation of the World Bank Nigeria Development Update, November 2021 edition titled ‘Time for Business Unusual’, warned that if subsidy was not removed 35 out of the 36 states of the federation might not be able to pay salaries in 2022.

El Rufai also said Nigeria was losing N250 billion monthly to subsidy payments.

The World Bank had also backed moves to end subsidy, and in November 2021 advised that the Nigerian government end its ‘expensive’ fuel subsidy regime within three to six months.

The Nigerian government, which says the subsidy does not benefit ordinary Nigerians, had earlier disclosed plans to disburse N5,000 monthly stipend to 40 million poor citizens to assist them cushion the impact of the removal of fuel subsidy.

But the plan was roundly condemned by Nigerians, who questioned the sincerity and workability of the proposed arrangement.

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