The Minister of State for Petroleum Resources, Chief Timipre Sylva, says it is clear that it is not possible to remove subsidy on petroleum products due to some impediments.
He said this during a meeting with Senate President Ahmad Lawan on Monday in Abuja over the planned removal of subsidy on petroleum products by the Federal Government.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, was at the meeting.
According to Timipre, it is clear that it is not possible at this time for the government to remove the subsidy.
“It is not within the contemplation now, of this administration, to remove subsidy, but of course, if there are legislative enablers that will ensure it is within the law, then I think it is a legislative responsibility.
“Subsidy removal will not happen. When you pass a law, a law is not cast in stone. In implementing the law, you now arrive at some impediments to implementation.
“We now feel we need to take care of those impediments because before subsidy is removed, there are certain things that need to be put in place to protect the people.
“We feel we need sometime to be able to put everything in place so that when subsidy is removed, it will have minimal impact on the people,” the minister said.
In his remarks, Lawan faulted the timing of the planned subsidy removal.
He said that in as much as the administration and management of subsidy on petroleum products were flawed, the President Muhammadu Buhari-led government believed that sufficient planning must be carried out before its eventual removal.
He said: “The position of everyone in government today is that, admittedly, subsidy administration and management are flawed because of so many reasons.
“Admittedly, the burden is huge and massive and there is need at one point to do away with the subsidy.
“Even though our economy is growing, we still have the challenge of getting things to be better for our people.
“A lot of us in this administration believe that the issue of removal of subsidy should be handled with utmost care, especially that sufficient planning needs to be done.”
Lawan appealed the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) to stop their planned protest against the proposed removal of fuel subsidy.
The senate president said the move was unnecessary.
“I am taking this opportunity to appeal to the TUC and NLC to shelve this plan to go on strike or demonstration, it is totally unnecessary.
“There is not going to be removal of subsidy; so, there is no need for this. Please, let’s not create unnecessary tension where there should be none,” he said.
The Minister of Finance, Ahmed, said that the Federal Government made provisions for fuel subsidy in the 2022 Budget – from January to June.
According to her, all payments on fuel subsidy ordinarily would cease as from July 2022.
She said that in view of the timing which was “problematic”, the government decided not to go ahead with the removal of subsidy in July, particularly against the backdrop of outcomes from ongoing consultations.
She added that the Federal Government was exploring alternatives to premium motor spirit as well as pushing to step up the country’s crude oil refining capacity.
The labour unions had planned to hold a protest from Jan. 27 over the planned subsidy removal.
What indefinite postponement of petrol subsidy removal means – Economist
An economist, Dr Muda Yusuf, says the decision of the Federal Government to postpone the removal of petrol subsidy indefinitely has a weighty economic cost.
Yusuf, who is the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), made this known in a statement issued on Monday in Lagos.
Hajia Zainab Ahmed, Minister of Finance, Budget and Economic Planning, had made the announcement on Monday in Abuja, speaking at the National Assembly, that the government would no longer go ahead with its earlier plans to remove subsidy on Premium Motor Spirit in July 2022.
Reacting to the development, Yusuf noted that the capitulation on the subsidy removal did not come as a surprise because of the prevailing realities and opposition by organised labour.
He said: “There were too many odds against the move. There were obvious concerns about the potential political cost to government and the ruling party.
“There were worries about the social cost given the excruciating poverty in the country. There was also the waning goodwill required by government to enlist the support of the people.
“The whole subsidy story became a political economy matter. It was moved from the realm of economics and investment to the political realm.
“The outcome was predictable, especially with an impending general elections next year.
“But the economic cost of the capitulation is equally weighty. The truth is that you cannot eat your cake and have it.”
According to him, Nigerians should expect the cost of funding the subsidy to be much higher this year because of the surge in crude oil price.
Yusuf said if the oil price remains high for most part of the year, the subsidy cost could go as high as N2.5 trillion or even more by the end of the year.
He said: “This would surely affect funding for critical infrastructures such as roads, railways, healthcare education, and even security.
” The petroleum products smugglers, beneficiaries of the fiscal leakages in the fuel subsidy ecosystem and their collaborators will continue to smile to the banks for the next one and half years.”
According to him, it will be tough for some states in terms of payment of salaries, especially states that are heavily dependent on federal allocation.
“Many will struggle to meet their financial obligations as sub-nationals,” he said.
Yusuf , a former Director General of the Lagos Chamber of Commerce and Industry, said macroeconomic risks would become elevated as fiscal deficit and borrowing significantly surpasses projections in the 2022 budget.
He added that the Central Bank of Nigeria may have to continue to cover financing gaps through ways and means.
” This of course has serious inflationary implications. The macroeconomic outcomes would adversely impact on the exchange rate, leading to further depreciation of the currency.
“Meanwhile, prospective investors in the downstream oil sector would withhold their investments until the policy environment becomes conducive.
“Additionally, a major confidence crisis has been created around the Petroleum Industry Act as a result of this capitulation.
“These are the price we would have to pay as a country for the policy reversal,” Yusuf said.