• Thursday, June 13, 2024
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Safety nets, labour unions as litmus test for subsidy removal

Subsidy removal in a fix as refineries miss repair deadline

The nature and scope of palliatives and negotiation skills with labour unions are expected to test Nigeria’s current resolve to jettison fuel subsidy in the coming weeks.

On Monday, after taking the oath of office in a colourful ceremony attended by local and foreign dignitaries, President Bola Tinubu announced that “fuel subsidy is gone”.

“On fuel subsidy, unfortunately, the budget before I assumed office is that no provision is there for fuel subsidy. So, fuel subsidy is gone,” Tinubu said.

“We commend the decision of the outgoing administration in phasing out the petrol subsidy regime which has increasingly favoured the rich more than the poor. Subsidy can no longer justify its ever-increasing costs in the wake of drying resources,” he added.

Experts say the inevitable removal of petrol subsidies without a detailed nature and scope of palliatives would lead to serious confrontation from labour unions, which have always threatened to resist any attempt to remove subsidy on petrol without full restoration of the refineries in the country.

“Ideally, the new government ought to have announced some sort of social safety net, cushioning the most vulnerable Nigerians from the impact of the subsidy removal alongside the decision to remove petrol subsidy,” Ola Alokolaro, partner, energy and infrastructure at Advocaat Law Practice, said.

“We should expect a marathon of meetings between labour unions and the new government in coming weeks,” Alokolaro added.

In Africa’s biggest economy, protesters often shut petrol stations, formed human barriers along motorways and hijacked buses in anger at the government’s lifting of fuel subsidies, a development that often triggers a wave of protests.

As the time of filling in this report, the Nigerian Labour Congress (NLC) is yet to respond to Tinubu’s decision to remove petrol subsidy

The position of labour unions is that the nation’s four refineries should be functional before subsidy removal.

Early this year, the Trade Union Congress of Nigeria (TUC) tasked the federal government to take into consideration the attendant economic impact on the masses.

“There must be assurances that refineries are fully overhauled and establishment of modular refineries encouraged,” it added.

The trade congress noted that the effective policing of the nation’s borders to stem the rate of petroleum products smuggling must also be implemented.

TUC, in a statement on Tuesday, said it was “taken aback, even horrified” when Tinubu announced the withdrawal of subsidy on petroleum products.

“If by this, he means increases in pump price and the exploitation of the people by unregulated and exploitative deregulated prices, then it’s a joke taken too far. It is not for nothing the Buhari government pushed this to the new administration, but we expect the Tinubu government to be wise on such a sensitive issue and be more explicit in its pronouncement to avoid contradictory interpretation when comparing his written statement, what he said and the provision in 2023 Appropriation Act,” it said.

“We dare say that this is a very delicate issue that touches on the lives, if not very survival, of particularly the working people, hence ought to have been treated with utmost caution, and should have been preceded by robust dialogue and consultation with, the representatives of the working people, including professionals, market people, students and the poor masses,” the union added.

Kelvin Atafiri, CEO of Cavazanni Human Capital Limited, urged the Tinubu’s government to address issues in the downstream sector such as trade finance, guarantee strategic stock, and provide access to crude oil for refineries before the complete removal of petrol subsidy

He called on the government to implement appropriate palliatives in the form of public transportation and freight of agricultural produce, ensure transparent and effective communication, and improve access to foreign exchange.

“Taming labour unions is critical for the removal of petrol subsidy,” Atafiri said.

Oyeyemi Kale, partner and chief economist of KPMG Nigeria, said a holistic and well-phased approach is needed for petrol subsidy removal.

“Conversations must take place to determine how the government will provide palliatives for affected citizens to minimise the negative effects of the policy,” Kale said at a recent programme on ARISE NEWS Channel.

Two weeks ago, Abubakar Ahmad, a member of the House of Representatives Committee on Loans, Aids and Debt Management, said federal lawmakers approved the $800 million World Bank loan request of former President Muhammadu Buhari to cushion the effect of petrol subsidy removal.

The lawmaker, however, argued that the loan would not be utilised by the Buhari administration, saying the incoming government would deploy its own approach to utilise the loan.

“The $800 million — there were so many talks that we did, especially we in the loan committee and we advised them: ‘First, leave this thing to the incoming government,’” Ahmad, who was a guest on Channels Television’s Sunrise Daily, said.

This follows the federal government’s April announcement of an $800 million World Bank grant targeting 50 million vulnerable Nigerians or 10 million households, as part of its subsidy palliatives measures.

Read also: 8 tips to stay fuel efficient amid subsidy removal

However, the request was met with opposition in some quarters, especially among the civil society organisations.

In a statement seen by BusinessDay, Civil Society Legislative Advocacy Centre lamented what it described as the nonchalant attitude displayed by the Buhari administration towards the country’s crippling debt crisis.

Kelvin Emmanuel, chief executive officer of Dairy Hills, described the $800 million World Bank loan as a reflection of the government’s misplaced priority.

“The Federating Units has a current debt stock of N46.25 trillion, with the state governments taking only 13.7 percent of that total, the total external debt stock of this amount is N18 trillion,” he said.

“The hand-outs, like billions of naira disbursed in the past, will do nothing to reduce the unemployment rate projected to reach 40.6 percent in 2023, or raise the per capita income of Nigerians from $2100, which has dropped 48.5 percent within the last eight years,” he added.