• Tuesday, March 05, 2024
businessday logo

BusinessDay

Push for subsidy removal hits wall of anger from naira redesign

The end of petroleum subsidies in Nigeria: A call for energy efficiency

Chances that outgoing Nigerian president Muhammadu Buhari will put an end to costly petrol subsidies that have battered the government’s finances before he leaves office in a month are now hanging by a thread.

That’s after Buhari received a security report saying that the pain and anger caused to Nigerians by the Naira shortage is responsible for renewed fierce opposition to the subsidy removal.

That security report, according to sources familiar with its details, is why Buhari is now unlikely to remove the subsidy.

The naira redesign attempt by the Central Bank of Nigeria led to a severe cash crunch that saw currency in circulation fall to its lowest in 14 years, according to official data.

The deadline for phasing out high-value naira notes was later postponed to December 2023 after the country’s highest court intervened, bringing much-needed relief to Nigerian businesses and households.

“It may have been a tad easier to push the subsidy removal if it wasn’t against the backdrop of the bruising impact of the failed naira redesign,” a government source familiar with the matter said.

Read also: Africa Finance Corporation acquires Pecan Energies AS 100% shares

Opposition to the subsidy removal is growing with several groups threatening mass protests. The Northern Youth Council of Nigeria, a group of young Nigerians from the northern part of the country, are the most recent to threaten civil action.

Buhari who had initially seemed to leave the removal of the subsidy to the next administration brought the date closer but is yet to provide a clearly outlined roadmap for its removal barely a month before he steps down.

Only last week, Gabriel Taminu Aduda, Permanent secretary, Ministry of Petroleum Resources, said that there was no specific date for the subsidy removal and alluded to the fact that considerations were still being made about the impact it would have on the people.

“We can’t be too specific (about a date for the subsidy removal) until every indices has been considered to ensure that the effect is not too hard on the average Nigerian,” Aduda said at the Nigerian International Energy Summit (NIES).

Removal of the petrol subsidy is one of the key reforms that Nigeria’s President-elect Bola Tinubu vowed to implement on resumption of office.

Tinubu, who returned to Nigeria on Tuesday after a month-long stay in France, said he felt “refreshed” and “ready for the task ahead.”

One of those tasks will be to remove the subsidy that is eating away at the cash-strapped government’s revenues.

Latest World Bank data showing that Nigeria spent 96 percent of its revenues repaying creditors in 2022 adds further pressure on Abuja to end the petrol subsidy.

Nigeria spent N4.39 trillion subsidising petrol in 2022, according to data from the NNPC.