Recall that a few days ago, the Minister for Finance, Budget and National Planning, Zainab Ahmed announced the plan by the federal government to stop the subsidisation of petrol by mid-2022. According to her, the practice is too expensive for the government to maintain as the Nigerian National Petroleum Commission (NNPC) on behalf of the government spends about ₦250 billion monthly on subsidy, which rounds up to almost ₦3 trillion per year.
“So the Petroleum Industry Act has a provision that all petroleum products must be deregulated. And in the 2022 budget, we made a provision to assume that at the maximum by the end of June, we must exit subsidy,” Ahmed said.
To mitigate the attendant consequences of this drastic measure, the minister said the government will disburse ₦5,000 to the Nigerians who will be most affected by the policy. She put the actual figure between 20 to 40 million Nigerians. The financial aid will last for between 6-12 months pending a final decision by the federal executive council.
“The intervention we want to provide, it’s for between 20 to 40 million people and there is still a lot of work going on. We have a committee that is chaired by His Excellency the Vice President, state governors and a few of us ministers as members. So we have to have a landing as to the exact number between 20 to 40 million.
But the Chairman of the Senate Committee on Finance, Senator Adeola Olamilekan has refuted the claim by the minister of finance that the 5,000 intervention fund is in the proposed budget for 2022.
Olamilekan was quoted as saying, “The Minister of Finance, Budget and National Planning was quoted to have said that 40 million Nigerians would be paid N5000 as transportation allowance in lieu of the fuel subsidy.
“I don’t want to go into details for now. I believe that if such a proposal is to come to pass, a document to that effect must be sent to National Assembly for us to see how possible it is and how do we identify the 40 million Nigerians that are going to benefit.
“There are still a lot of issues to be deliberated upon and looked into if eventually, this will come to pass. How do we raise this money to pay these 40 million Nigerians because I know that even the federal government revenues are from this so-called oil and other sources.
“We don’t have anywhere in the budget where 40 million Nigerians will collect N5000 monthly as transportation allowance totalling N2.4 trillion.”
Financial experts and civil society organisations have kicked against the policy, although for different reasons. Most financial experts believe the removal of subsidy is inevitable as the current practice is unsustainable but think that the timing is poor.
A professor of Economics and Public Policy at the University of Uyo and the Chairman of the Foundation for Economic Research and Training, Prof Akpan Ekpo, said the government needs to put a mechanism in place to reduce the effect on the poor.
He said, “There should be a gradual phased-out removal of the fuel subsidy. The removal will make all prices go up. There would be structural inflation because the economy depends on oil and the whole structure of the economy would be affected by the removal of the subsidy.
The Director-General of the Manufacturers Association of Nigeria, Mr Segun Ajayi-Kadir in a statement said, “Regardless of the arguments back and forth on the issue, PMS remains a commercial product. It is therefore not insulated from the laws of demand and supply.
“From an economic point of view, and that is the area I am comfortable to talk about, it should not come as a surprise. The rise in the price of crude oil should signal the inevitable increase in the landing cost of PMS in the country. You have oil marketers importing the fuel with the need to recover their costs and make a profit. Taken together, it is inevitable that the pump price of PMS will increase.He however, said fuel-induced inflation might arise.
“The increase in the cost of transportation – and the multiplier effect on other costs – that will accompany the more than 100 per cent increase will erode the disposable income of the average Nigerian.
On their part, the Nigerian Labour Congress (NLC) in a statement on Wednesday by its President, Ayuba Wabba, rejected the planned fuel subsidy removal. In a statement titled, ‘Nigerian workers refuse to take the bait,” the congress said, “The contemplation by the government to increase the price of petrol by more than 200 per cent is a perfect recipe for an aggravated pile of hyper-inflation and astronomical increase in the price of goods and services.
“This will open a wide door to unintended social consequences such as degeneration of the current insecurity crises and possibly citizens’ revolt. This is not an outcome that any sane Nigeria wishes for.
“We wish to warn that the bait by the government to pay 40 million Nigerians ₦5,000 as a palliative to cushion the effect of the astronomical increase in the price of petrol is comical, to say the least.
“The total amount involved in this queer initiative is far more than the money government claims to spend currently on fuel subsidy. Apart from our concerns on the transparency of the disbursement given previous experiences with such schemes, we are wondering if the government is not trying to rob Nigerians to pay Nigerians? Why pay me ₦5000 and then subject me to perpetual suffering…
“Clearly, government thoughts on the so-called removal of fuel subsidy is cloudy and appears to be a “penny wise-pound foolish” gamble. It is clear that the palliative offered by the government will not cure the cancer that will befall the mass of our people who suffer the double jeopardy of hype-inflation while their salaries remain fixed.”
Meanwhile, while speaking at the presentation of the World Bank Nigeria Development Update, November 2021 edition titled “Time for Business Unusual”, Malam Mele Kyari, Group Managing Director and Chief Executive Officer of Nigerian National Petroleum Company Limited, predicted that the price of petrol will rise to between ₦320 – ₦340 per litre when subsidy is removed.