Federal Government Takes U-Turn In Petrol Subsidy Removal Stance

The federal government disclosed Thursday that the suspension of the petrol subsidy, which was supposed to happen in June, will not go ahead as planned.

The minister of Finance, Budget and National Planning, Zainab Ahmed, told the State House correspondents after the National Economic Council meeting in Abuja that the removal of fuel subsidy was not happening, at least for now.

"Council agreed that the timing of the removal of fuel subsidy should not be now," she said, Punch reported. "But that we should continue with all of the preparatory works that need to be done and that this preparatory has to be done in consultation with the states and other key stakeholders including representatives of the incoming administration."

She continued, "Council agreed that the fuel subsidy must be removed earlier rather than later because it is not sustainable. We cannot afford it anymore. But we have to do it in such a way that the impact of the subsidy is as much as possible, mitigated on the lives of ordinary Nigerians."

Ahmed explained that the council will be required to look into some alternative options to the fuel subsidy that will be planned and subsequently put in place before taking any action.

She noted that once the subsidy was removed, common people will be the most affected, hence it needs to be done at the right time.

Ahmed shared that the Federal Government and the representatives of the states will be working together in order to find a solution.

"We have a plan that we will start working on, putting the building blocks towards the eventual removal of the first subsidy," she added. "And if I may remind this forum that the budget for 2023 has a provision for fuel subsidy only up to June 2023 and also the Petroleum Industry Act has a provision that requires that all petroleum products must be deregulated 18 months after the effective date of the PMS removal and that that period is also up to June 2020."

The minister suggested earlier in January that the government should implement the fuel subsidy policy in the second quarter of 2023. She explained that Nigeria needs to get rid of this fuel subsidy regime, as it is becoming a huge factor in revenue loss.

"You can look at it in two ways, the payments made are revenues that would have come to the government but don't because it is being spent on fuel subsidy," she said, Premium Times reported.

Earlier this week, the World Bank warned Nigeria that fiscal and debt pressures will increase due to falling oil revenues in the country.

The World Bank advised the Nigerian government to work on its macroeconomic stability through various reforms such as "increase oil and non-oil revenues, tighten monetary policies to reduce inflation, unify the multiple FX windows, and adopt a single, market-responsive exchange rate."