FG Shelves Plan to End Fuel Subsidy From July

Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, has announced the resolve of the federal government to jettison its earlier plan to remove subsidy on petroleum products from July. Ahmed stated this on Monday at a stakeholders’ meeting held at the National Assembly complex in Abuja.

Minister of State for Petroleum Resources, Chief Timipre Sylva, also stated at a different forum on Monday that subsidy paid on the pump price of petrol would remain for now. Sylva revealed that President Muhammadu Buhari was against fuel subsidy removal.

The stakeholders’ gathering was convened at the instance of President of the Senate, Dr. Ahmad Lawan, who appealed to the labour unions to cancel the protests initially planned over the subsidy.

However, petroleum products marketers in the country warned that the federal government’s decision to shelve subsidy removal would send the wrong signal to the world and foreign investors.

But the ruling All Progressives Congress (APC) commended the federal government for the decision to defer the removal of subsidy, saying ending the policy at this time would cause more hardship to Nigeria.

Meanwhile, organised labour, under the umbrella of the Nigeria Labour Congress (NLC), dispatched protest letters to governors of the 36 states of the federation and the Minister of the Federal Capital Territory FCT, Abuja, expressing its opposition to the proposal by the federal government to increase the pump price of petrol, otherwise known as premium motor spirit (PMS).

The meeting at the National Assembly had in attendance Sylva; Chief Executive Officer of the Nigerian Midstream and Downstream Regulatory Authority, Farouk Ahmed; Managing Director of the Nigerian National Petroleum Company Limited, Mele Kyari; and Chief Executive Officer of the Nigerian Upstream Regulatory Commission, Engr. Gbenga Komolafe.

Others were Special Assistant to the President on Natural Resources, Habib Nuhu; Permanent Secretary, Federal Ministry of Finance, Aliyu Shehu Shinkafi, and Permanent Secretary, Ministry of Petroleum Resources, Nasir Sani-Gwarzo.

The finance minister said the federal government initially planned to remove subsidy on petroleum products from July. She said that was the reason adequate provision was made in the 2022 national budget for subsidy payment till June.

Ahmed explained, “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 (PIA), 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. 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 on-going discussions and consultations in terms of putting in place a number of measures.”

The minister said the measures included the rollout of the refining capacities of the existing refineries and the new ones, which would reduce the amount of the 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 subsidy from July to December 2022 to whatever period that we agreed was suitable for the commencement of the total removal,” she stated.

The minister told the meeting that the federal government would soon unfold the palliative being prepared to cushion the adverse effects of subsidy removal whenever it was implemented.

She said, “What we have to do now is to continue with the discussion that we are making in terms of putting in place a number of measures, one of which is the deployment of alternatives.

“The roll out of enhanced refining capacity, including the 650, 000 barrels per day refinery and also the rehabilitation of the four national refineries that have a combined refining capacity of 450 000 barrels per day and also the necessary rehabilitation

“These would increase the refining capacity and means that we will import less

“As we were discussing there is a possibility of amending the budget; we need to come back to the National assembly by way of amendment to make additional provision for fuel subsidy from July 2022 going forward.”

On his part, Sylva said the meeting held behind closed doors agreed that the proposed removal of subsidy on petroleum products should be put on hold till necessary palliatives were put in place. He also said the PIA would be reworked by the federal lawmakers in line with the current reality.

The petroleum minister stated, “The law (PIA) has been passed. We are all aware of that. But there is no law that is cast in stone. It is clear to everyone that at this point, operating the law is not possible within the six months framework that has been provided for in the law.

“It is also a legislative responsibility now to see what could be done in extending that time frame for it to be in the purview of the law.

“Secondly, the other legislative issue arising from it is the provision for subsidy in the budget, which would no longer be there after June.”

Speaking on a national television programme last night, Sylva stated that the federal government was mindful of the effect of subsidy removal on the most vulnerable groups, stressing that removing the subsidisation is unfeasible for now.

He said, “I will tell you categorically that at this moment, the complete removal of subsidy is not in our plate at all. The president is not in support of removing subsidy at this time. So, we are working out other processes.

“We all know that it is a desirable policy direction, but we also know that it will have some impact on the people and until some details are worked out with labour and other stakeholders, we will not remove subsidy. At this time, I can tell you that it is not in our plate at all.”

Sylva also stated that the Dangote refinery would have significant impact on the fuel supply dynamics, including easing pressure on the economy, especially when combined with the on-going revamping of the three refineries in the country.

He said with the Dangote facility and the three refineries in operation, Nigeria could become a net exporter of petroleum products in the nearest further.

On gas, the minister stated that with the full domiciliation of all the gas produced by the Nigeria LNG, prices were beginning to come down. He stressed that the government might back down on the imposition of a 7.5 per cent Value Added Tax (VAT) on imported gas.

“We are trying to see how we can remove VAT and some taxes on imported gas,” he stated.

Sylva maintained that although not a regulated market, government was mindful of the fact that rising gas prices could negatively affect majority of Nigerians.

He added that Nigeria would continue to consolidate its gas resources as a transition fuel, before the extinction of fossil fuels in some decades to come.

The senate president urged organised labour in the country to shelve their proposed nationwide protests slated for Thursday, January 27.

He said such action was no longer necessary.

Lawan said, “I am taking this opportunity to speak to the Trade Union Congress (TUC) and NLC to shelve their plan to go on strike or demonstration. It is totally unnecessary.

“There is not going to be removal of subsidy, so let us not create unnecessary tension where there should be none.

“Please, forget about the 27th of January deadline. We are supposed to come together and work assiduously to see that our country is stable that our people to enjoy the benefits of government programmes and projects.

“At the end of the day, whatever decision we would be taking would be in the best interest of our people. Recall that last Tuesday, I visited the president (Muhammadu Buhari) on the possible removal of subsidy on petroleum products in the country.”