NEC suspends fuel subsidy removal

• Insists more work needs to be done on palliatives.

The National Economic Council ( NEC) on Thursday, urged the Federal Government to put the June deadline for the removal of fuel subsidy on hold pending the review of plans to provide palliatives for Nigerians.

The Minister of Finance, Budget and National Planning, Dr. Zainab Ahmed, who disclosed this said Council agreed that the time for subsidy removal should not be now, but that preparatory works that need to be done and consultations with relevant stakeholders in the states including representatives of incoming administration should continue.

Ahmed, who noted that the Council agreed that the subsidy must go now, rather than later, added that the nation can no longer afford it.

Recall that successive administrations in Nigeria have failed to completely remove the petrol subsidy due to its sensitive political nature.

From January to September 2022, the government reported that it spent as much as about $ 7.5 billion on fuel subsidies, a huge sum of money that would have been channeled to the development of critical sectors of Nigeria’s economy.

The World Bank had asked Nigeria to cut borrowing, increase taxation and reduce such inefficient use of resources, for the economy to grow at 3.2% in 2023.

However, the Minister in a chat with State House Correspondents in Abuja said that NEC agreed that it has to be done in such a way that the impact of the subsidy removal should as much as possible be mitigated.

“This requires looking at alternatives to fuel subsidy that need to be planned for and subsequently put in place, but also what needs to be done to reduce the impact of the removal”, age stated.

She disclosed that the federal government has been working together with the states on the issue, adding that the federal budget for 2023 has provisions for the fuel subsidy up to June, while the Petroleum Industry Act( PIA) has provisions that indicate that the industry must be deregulated two months after the removal of the subsidy regime, which is also June 2023.

Similarly, the federal government had, while presenting the 2023 Appropriation Act to the National Assembly stated that it made provisions of N3. 36 trillion to cover fuel subsidy payments for the first six months of 2023, which expires in June.

She said: “Today I was in the National Economic Council, where we discussed the issue of post-subsidy removal and Council agreed that the timing for the removal of subsidy should not be now but that we should continue with all of the preparation works that need to be done and that this preparation work has to be done in consultation with the states and other key stakeholders, including representatives of the incoming administration.

“Council also agreed that subsidy must be removed earlier, rather than later because it is not sustainable. We cannot afford it anymore. 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 humans.

“So this will require looking at alternatives to the post-subsidy that needs to be planned for and subsequently put in place but also what needs to be done to support the people that are most affected as a result of the removal.

“So we will be working together with representatives of the state who will have plans that they will start working on, putting the building blocks towards the eventual removal of the fuel subsidy.

“You will recall that budget for 2023 has a provision for subsidy only up to June 2023 and also the Petroleum Industry Act ( PIA) has a provision that requires that all petroleum products must be deregulated 18 months after the effective date of the PMs removal and that period is also up to June 2020″.

The Minister disclosed that the federal government has agreed to form an expanded committee to look at the process for the removal including determining the exact time and also 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.

According to her, “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 also have to be engaging with the petroleum marketers.

“The immediate committee is just comprising the Ministry of Finance, Budget and National Planning, the NNPCL, the regulator, the downstream upstream regulator.

“So, there’ll be an expanded committee so that it is not just a few people’s thoughts that will guide the process and that there is sufficient consultation taking inputs from key stakeholders into the measures that need to be taken.

“What I said is that it is not going to be removed now, which means it will not be removed before the transition is completed”.

She noted that what this means is that the nation will now be operating “two laws in the oil sector”.

But she added that the incoming administration will have to amend both the Appropriation Act and the PIA to bring them at par with current reality, based on their decisions on the fuel subsidy issue.

“So it is the committee’s work, which will include the representatives of the incoming administration to determine if the removal can be done by June as planned.

“The work plan will be designed to exit as a tool but if the determination is that the period is extended, that will mean that we will have to revisit the Appropriation Act, if the subsidy will be extended beyond June 2023, as well as the Petroleum Industry Act( PIA).

On the issue of the $800 million loan from the World Bank, she said that “so far, what we have is that $800 million that has been secured and is intact. Again, that is a matter for discussion. The states may have their own plans, they may want to have their own designated programs different from what the federal government may want to do”.

Champion news reporting,
For a better society

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