NEC Suspends Subsidy Removal Till After Handover
By Mathew Dadiya, Abuja
The National Economic Council (NEC) has suspended the planned removal of petroleum subsidy earlier announced by President Muhammadu Buhari’s administration.
Briefing State House Correspondents after the NEC meeting presided over by Vice President Yemi Osinbajo, the Minister of Finance, Budget and National Planning, Mrs.Zainab Ahmed disclosed this on Thursday at the Presidential Villa Abuja.
Mrs. Ahmed said that the removal of the subsidy will likely take effect in June because the Petroleum Industry Act (PIA), and the 2023 budget provided subsidy till June, adding that any delay may require the amendment of the PIA and the budget provision.
She explained that although the removal of the fuel subsidy is imminent, the Council decided that the timing for the removal of the subsidy should not be now.
The Minister narrated that the council decided that the Federal Government should continue with all of the preparatory work that needs 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.
“The National Economic Council discussed the issue of post-subsidy removal. The 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 needs 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.
“The council agreed that the fuel 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 a plan that will start working on putting the building blocks towards the eventual removal of the first subsidy. And finally, remind the forum that the budget for 2023 has a provision for subsidy only up to June 2023, and also 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 and that that period is also up to June 2020.
“I said that we agreed to form an expanded committee that will be looking 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,” the finance, budget and national planning minister, explained.
She further stressed that the issues bordering on the deadline for the removal of fuel subsidy should be the burden of the next administration as the laws state that the removal of fuel subsidy should happen in June.
“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. That’s what it means. But then we have two laws that have inadvertently made the provision that we should exit by June.
“So the committee’s work, which will include the representatives of the incoming administration determining if the removal can be done by June then they will plan. The work plan will be designed to exit as of June, but if the determination is that the period is to be extended, it will mean that we as a country will have to revisit the Appropriation Act for example because the 2023 budget only made provision up to June.
“So, if we’re extending beyond June it means we’ll have to revisit the Appropriation Act and do a supplementary or amend the bill and also the Petroleum Industry Act (PIA).
“So, these are the reasons why we had to do this consultation. We would like to get input from the governors. They’re going to provide us with their representatives to work together with us to have a defined process that will take us toward the removal.
“But one thing that is clear is everybody agrees that the subsidy should be removed very quickly because the cost is only not efficient but is also not sustainable, and that when the time comes for removal, the removal will be done once and for all,” she said
Fielding questions on the specific measures to be put in place to mitigate the effect of subsidy removal and how the decision will affect the law on the ground as the PIA has given a definite time for the removal of subsidy, the 2023 budget provides for subsidy until June 2023, what happens after June 2023, she said:
“I said that we agreed to form an expanded committee that will be looking 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.
“So this is a decision that has been taken to expand the committee that is currently working with representatives of the states and it also will have to be engaging with labour, will have to be engaging with petroleum marketers.
“The immediate committee is just comprising the Ministry of Finance, the NNPC, the downstream upstream regulator, as well as the Ministry of Finance, budget, a national plan. So there’ll be an expanded committee so that it is not just a few people’s thoughts that will guide the process but that there is sufficient consultation taking inputs from key stakeholders into the measures that need to be taken.”
Responding to a question on the $800m World Bank loan to help cushion the effect of fuel subsidy removal, the Minister said, “On the issue of the $800 million so far, what we have is that $800 million that has been secured.
“We’re hoping that the removal of fuel subsidy, with the savings that removal will cause that the Federation which is the federal government and states themselves will be able to provide further measures from this increased revenue that will accrue to the Federation account.
“Again, that is a matter of discussion. The states may want to have their design programmes the federal government you want to do something different. So we have to discuss how to utilise that savings and that’s one thing that was also presented today at the National Economic Council.”
CBN Debunks Report of Naira Devaluation
By Tony Obiechina, Abuja
The Central Bank of Nigeria (CBN), has debunked a newspaper report to the effect that it has devalued the Naira to 630/$1.
Reacting to the report in a statement on Thursday CBN Acting Director of Corporate Communications Department, Dr Isa AbdulMumin said the story was an outright falsehood.
The statement reads:
“The attention of the Central Bank of Nigeria (CBN) has been drawn to a news report by Daily Trust Newspaper of June 1, 2023, titled “CBN Devalues Naira To 630/$1”.
“We wish to state categorically that this news report, which in the imagination of the newspaper … is replete with outright FALSEHOODS and destabilizing innuendos, reflecting potentially willful ignorance of the said medium as to the workings of the Nigerian Foreign Exchange Market.
“For the avoidance of doubt, the exchange rate at the Investors’ & Exporters’ (I&E) window traded this morning (June 1, 2023) at N465/US$1 and has been stable around this rate for a while.
“The public is hereby advised to ignore the news report by Daily Trust in its entirety, as it is speculative and calculated at causing panic in the market.
“Media practitioners are advised to verify their facts from the Central Bank of Nigeria before publishing in order not to misinform the public”.
NEITI Hails Fuel Subsidy Removal, Offers Eight Strategic Considerations
The Nigeria Extractive Industries Transparency Initiative (NEITI) has lauded the political will and sincerity of purpose demonstrated by President Bola Tinubu in removing fuel subsidy.
A statement from NEITI House, Abuja on Tuesday, described the move as a positive move by the administration to decisively implement the findings and recommendations contained in the NEITI reports.
The statement, signed by Mrs Obiageli Onuorah, the Deputy Director/Head Communications and Stakeholders Management, said bold step was required to block leakages, grow revenues and advance the ongoing reforms in the oil, gas and mining industries.
President Bola Tinubu, in his inaugural speech on Monday, said the fuel subsidy regime had ended with the commencement of his administration.
Onuorah recalled that its recommendations for the removal of fuel subsidies have remained a persistent request since 2006 given the agency’s concerns about the huge financial burden that the subsidy regime imposed on the growth of the Nigerian economy over the years.
She explained that from the NEITI reports, between 2005 and 2021, the country spent $74.39 billion which translated to N13.69 trillion on subsidy.
According to the NEITI report, a breakdown of these figures showed that in 2005, the government paid $2.6 billion dollars (N351 billion) as subsidy. In 2006 and 2007, it paid $1.99 billion and $2.18 billion (N257 billion and N272 billion) respectively.
The report further pointed out that subsidy payments more than doubled in 2008 and 2010 and witnessed the highest increase ever in 2011 to $13.52 billion (N2.11 trillion).
She said a sharp decline was witnessed in the years 2012, 2013, 2014 and 2015 when it dropped to $3.34 billion (N654 billion) in 2012.
Onuorah said the decline in subsidy expenditure continued in 2016 and 2017 to as low as $473 million dollars (N154 billion) in 2017.
“The reduction was short-lived as the payments skyrocketed to over $3.88 billion (N1.19 trillion) in 2018 and 2021 to $3.58 billion (N1.43 trillion).
“By these figures, Nigeria expended an average of N805.7 billion annually, N67.1 billion monthly or N2.2 billion daily,” she said.
She said the NEITI data also showed that the amount expended on subsidies from 2005 to 2021 was equivalent to the entire budget for health, education, agriculture and defence in the last five years.
Onuorah added the sum equals the capital expenditure for 10 years between 2011 to 2020.
The deputy director explained that it was during this time (2011) that fuel subsidies dwarfed allocations to all critical areas of the economy.
“NEITI ‘s persistent calls for the removal of petroleum subsidies were informed by the fact that the ways of funding the expenditure over these years relied more on federation accounts funds, the Federal Government and sometimes from external borrowing with negative consequences on government overall revenue profiles.
“NEITI was also concerned that the consequences of funding subsidies have resulted in poor development of the downstream sector, declining GDP growth, rise in product theft, pipeline vandalism, environmental pollution and undue pressure on foreign exchange.
“Other challenges imposed on the economy were naira depreciation, low employment generation, the declining balance of payments and worsening national debt,” she said.
Onuorah said in a policy advisory released by NEITI in late 2022 to drive home the urgency to remove subsidy and resubmitted earlier in the year 2023, NEITI recommended eight steps to manage subsidy removal.
She listed the steps to include the urgency to strengthen the implementation of the Petroleum Industry Act (PIA) as a whole and not in parts.
NEITI also underlined the importance of unveiling the implementation of people-oriented welfare programmes to provide relief for the poor and vulnerable and advised on priority attention to be paid to the rehabilitation of the nation’s four refineries currently ongoing.
On other policy considerations, she said government should commission a special report on actual PMS consumption in Nigeria, enforce stringent sanctions for criminal activities in the sector and conduct appropriate stakeholders’ consultations, engagements and enlightenment. (NAN)
Nigerians Express Concern Over Immediate Implementation of Subsidy Removal
Nigerians have expressed concern over the implementation of subsidy removal in spite of President Bola Tinubu’s assurance that it would not take effect immediately.
A cross section of residents of Ibadan, Oyo State, expressed their feelings on Wednesday in separate interviews in Ibadan.
Majority of filling stations in Ibadan had started selling petrol at #500 per litre as the new official price released by NNPC.
However, queues had disappeared from many of the filling stations compared to what obtained on Tuesday.
Commenting, an Entrepreneur, Mr Tobi Adeyemi, said the development was not a good one.
According to Adeyemi, the new administration should have provided some sort of respite for Nigerians considering the enormous hardship being faced by Nigerians.
“This will definitely affect prices of goods and services; from tomatoes sellers to foodstuffs; transportation, increase in fuel price and so on.
“We will all bear the brunt of it together. I only pity salary earners who are on a fixed income. Besides, I don’t believe this is the right timing,” Adeyemi said.
Also, a sales representative, Dr Adeyinka Adekunle, said the previous administration had budgeted for subsidy till the end of June.
“So, to me it was shocking to learn that the removal had taken effect from May 31 based on what the previous administration had done.
“Everything is sort of confusing now because of the budgetary provision for subsidy till June end,” Adekunle said.
He, however, said a nation that was going to be great has to go through some teething periods.
In his remarks, an artisan, Mr Akinola Akinkunmi, said he has yet to comprehend the situation, because things were hard already and buying fuel at N500 per litre now would worsen the situation.
Akinkunmi said: “I cannot yet wrap my mind around how my business will survive; we are already struggling to make ends meet.
“With this development and absence of power supply from the distributing company, we are definitely going further down the poverty line.
“We need support for the government; we need help to survive this time,” Akinkunmi said.
Another entrepreneur, Mr Demola Adedeji, said the timing was not right as the economy had been in bad shape for some times now.
“At least, some things should have been put in place before the total removal of subsidy,” Adedeji said.
In his contributions, Mr Yinka Ajadi, a businessman, said that many people would go into depression as blood pressure of many Nigerians struggling to survive the situation would rise.
Ajadi said, “We can only hope for critical intervention at this time such as solving problem of power and production inputs.” (NAN)
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