The Federal Government with the support of Nigerian Governors’ Forum continues to insist and defend its plan to end payment of subsidy for Premium Motor Spirit (PMS) commonly known as petrol by 2022.
The assent of the Petroleum Industry Bill on August 16, 2021 by President Buhari, who also doubles as the “minister” for petroleum, was meant to transform the oil and gas sector for better performance and efficiency. One of the major observations was the absence of fuel subsidy payment. The 2022 proposed budget did not also capture fuel subsidy payment in its fiscal year. The Federal Government continues to argue that subsidy payment takes a huge chunk of government revenue, enriches only a few Nigerians and unsustainable in the short and long run. Governors from the 36 states affirm also that only two states, Lagos and Rivers can pay salaries if subsidy was to continue. Not much will be left for development projects as debt repayment for loans are ripping states off their monthly allocation from the centre. This stance by the government has earned the support of the World Bank, International Monetary Fund (IMF) and other foreign institutions, affirming that Nigeria could plunge into financial disaster owing to its dwindling revenue and rising debt profile.
Experts are interpreting its impact on different sectors of the economy. While some argued that subsidy removal would impact negatively on the stability of economic variables like price level, economic growth, trade balance, poverty and unemployment, some are of the opinion that though the economy will experience certain challenges at first, it will bounce-back and recover over time. The Nigerian Labour Congress (NLC), Trade Union Congress (TUC) and other pressure groups have challenged the government’s proposed removal and have threatened to shut down the economy if the government attempts to end subsidy payment. They have accused the government of being insensitive and insincere to the plight of ordinary Nigerians, and making workers minimum wage of N30,000 worthless, even when most states were yet to accept the payment of minimum wage. The questions in the mouth of many social commentators are numerous. What is the faith of over 85 million poor Nigerians living below the poverty line? Why has a government who criticised the past administration of subsidy removal in 2012 now advocating and insisting on its removal? What has happened to promises on revitalising Nigeria’s four government-owned refineries? What will the government at the federal and state level do with the money to be accrued from subsidy removal? These and many other questions remain unclear to Nigerians.
Read also: Fuel subsidy removal, diversification are critical to fixing Nigeria’s economy- Emeka Wogu
The minister of finance, Zainab Ahmed, said N250 billion is spent monthly on subsidy payment, which implies N3 trillion in a year when revenues from oil and tax are low as a result of the impact of COVID-19. The minister further proposed a government resolution to cushion the effect of subsidy removal by increasing and expanding the administration’s social intervention programmes including payment of N5,000 to 40 million poor Nigerians. Research shows that no such appropriation was included in the proposed 2022 budget, nor were the modalities for selecting or determining these 40 million poor and vulnerable Nigerians discussed or brought to public knowledge. Most poor and vulnerable Nigerians are believed to have no bank accounts, nor does the Federal Government have a comprehensive database of these Nigerians, who they are and their location. Previous social intervention programmes by the government like TraderMoni, Npower, COVID-19 palliative, COVID-19 survival funds have been marred with accusations of corruption, nepotism and deceit. Issues bordering on trust and corruption are fundamental challenges between the government and Nigerians. If they have failed and displayed lack of honesty in the past, can they now be trusted?
Dangote refinery, a privately owned oil refinery by Africa’s richest man and industrialist, Aliko Dangote, is expected to be Africa’s largest refinery and world’s biggest single-train facility at 650,000 barrels per day (BPD). This is the Federal Government’s hope for refining of crude oil while the four government-owned refineries wallow in shambles and inefficiency. Companies, industries and individuals depend heavily on petrol for daily sustenance. The transport sector also depends on petrol, that has a direct impact on goods, food price and cost of haulage.
The economic standpoint justifies the removal of subsidy, but a government that has shown insensitivity and dishonesty to Nigerians remains a concern. More Nigerians will fall below the poverty line, unemployment and inflation rate will surge, the business environment might not survive the shock and disposable income and savings will reduce. There is even greater possibility for more loans to be borrowed or misappropriated on funds accrued from subsidy removal or even spent on frivolities with continuous fiscal indiscipline by a set of leaders that have lost touch with their citizens.
Victor Alikor is development and health economist
