The move by Nigeria’s federal government to phase out its controversial fuel subsidy policy may no longer be feasible once more as the National Economic Council (NEC) on Thursday advised the government to shelve it until all preparatory plans with various segment of government, including states and the incoming administration are concluded.
The advice comes just as the Nigerian Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) expressed concern that removing petrol subsidy would have adverse impact on businesses that could lead to the shutdown of many Small and Medium Enterprises (SMEs) and exasperate the worsening unemployment rate in the country.
The administration of President Muhammadu Buhari had worked towards the removal of subsidy, culminating in its recent sourcing of an $800 million grant from the World Bank to provide palliatives for vulnerable Nigerians.
Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed the advice by NEC to newsmen yesterday, after the Council’s valedictory meeting, presided over by Vice President Yemi Osinbajo, at the State House, Abuja.
However, she said despite the suspension, NEC agreed on the need to continue discussion on the matter and the necessary preparatory work in conjunction with states, stakeholders and representatives of the in-coming administration.
She stressed that Council agreed that the subsidy regime must be removed eventually as it was not sustainable.
She affirmed NEC’s position that it was better to remove the subsidy now rather than later.
Ahmed said: “Today I was in the NEC meeting where we discussed the issue of post-subsidy removal. Council agreed that the timing for the removal of subsidy should not be now, but that we should continue with all of the preparation works that needs to be done and that this preparation work has to be done in consultation with the states and other key stakeholders, including representatives of the incoming administration.
“Council agreed that the first subsidy must be removed earlier rather than later because it is not sustainable. We cannot afford it anymore. 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.
“So, this will require looking at alternatives to the post-subsidy that needs to be planned for and subsequently put in place but also what needs to be done to support the people that would be most affected as a result of the removal.
“So, we will be working together with representatives of the state, we will have a plan that we will start working on putting the building blocks towards the eventual removal of the fuel subsidy.
“If I may remind the forum, that the budget for 2023 has provision for subsidy only up to June 2023 and also the Petroleum Industry Act (PIA) has a provision that requires that all petroleum products must be deregulated 18 months after the effective date of the subsidy removal and that period is also up to June 2023.”
Answering reporters’ questions on what happens after the June 2023 timeline for the subsidy removal when its funding would have ceased, the Minister said the Appropriation Act may have to be revisited or a supplementary budget made.
According to her, the PIA guiding subsidy removal may be tinkered with if the committee set up so decides.
Her words: “If I said that we agreed to form an expanded committee that will be looking at the process for the removal including determining the exact time and also the measures that need to be taken to provide support to the poor and the vulnerable and then also the alternatives that will be put in place, including ensuring that there is sufficient supply of petroleum products in the country.
“So, this is a decision that has been taken to expand the committee that is currently working with representatives of the states and it means also that we have to be engaging with petroleum marketers.
“The immediate committee is just comprising of the ministry of finance, the NNPC, the regulator, the downstream upstream regulator, as well as the Ministry of Finance, Budget, and National Planning.
“So, there’ll be an expanded committee so that it is not just a few people’s thoughts that will guide the process, that there is sufficient consultation taking inputs from key stakeholders into the measures that need to be taken.
“Yes, I did. What I said is that it is not going to be removed now, which means it will not be removed before the transition is completed. That’s what it means.
“But then we have two laws that have inadvertently made the provision that we should exit by June. So, if the committee’s work, which will include the representatives of the incoming administration determined that the removal can be done by June, then, the work plan will be designed to exit as at June.
“But its determination is that the period needs to be extended, that will mean that as a country will have to visit revisit the Appropriation Act for example, because the 2023 budget only made provision up to June.
“So, if we’re extending beyond June, it means we have to revisit the Appropriation Act and do a supplementary or amend the bill and also the PIA.
“These are the reasons why we had to do this consultation with NEC to get inputs from the governors. They’re going to provide us their representatives to work together with us to have a defined process that will take us towards removal.
“But one thing that is clear is that everybody agrees that the subsidy should be removed very quickly because the cost is only not efficient but it is also not sustainable, and that when the time comes for removal, the removal will be done once and for all.”
Ahmed said the $800 million facility sourced from the World Bank remains with the government, expressing hope that the fund would be added to the savings that would accrue from subsidy removal to provide for the poor and vulnerable.
She explained: “On the issue of the 800 million. So far, what we have is that 800 million that has been secured. We’re hoping that the removal of fuel subsidy with the savings that removal will cause that the Federation, which is federal government and states themselves will be able to provide further measures from this increased revenue that will accrue to the Federation account.
“Again, that is a matter of discussion. The states may want to have their own designed programmes, the federal government you want to do something different.”
The valedictory NEC meeting also hailed Osinbajo for providing an uncommon leadership to it in the last eight years.
Governor Bala Mohammed of Bauchi state told newsmen after the meeting that the Council used the opportunity to thank Osinbajo and appreciated his leadership as well as members, top government officials who have been guiding it on major economic issues, policies and programmes.
“And of course, he has shown nationalism and he has given each and every one of us members of the council opportunity to express ourselves without any hindrance.
“He had not brought any personal or political issues into his own leadership and that’s what made most of us to really appreciate him. And he had brought invention and innovation in governance and tolerance, tolerance in terms of whatever opinion expressed, he was there and very calm and of course, statemanly in his conclusions on his own resolutions.
“In the Council, we are very happy. We missed him and will continue to miss him. So, we sang a song, ‘he’s a jolly good fellow,’ and of course, all of us sang because of the kind of personality he is.
“We wish him and, of course, by extension the president who he is deputising for the kind of leadership they have given us, the kind of fraternity and unity they have exhibited as a team and of course, all the governors are happy that they have given us leadership.”
NACCIMA: Fuel Subsidy Removal Without Operational Local Refineries Will Hurt Business, Shutdown SMEs
Meanwhile, NACCIMA has expressed concern that the proposed removal of petrol subsidy would have adverse impact on businesses that could lead to the shutdown of many SMEs.
NACCIMA also called on the federal government to fix the country’s domestic refineries, which he described as productive palliative for subsidy removal rather than borrowing $800 million in foreign loan in order to distribute N8,000 for each beneficiary of the loan in the name of cushioning the adverse effects of the intended removal of the subsidy.
These declarations were made Thursday by the National President of NACCIMA, Mr. John C. Udeagbala, during the second quarter of 2023 press briefing of the association in Lagos.
He also advised the federal government to use the planned national census to expand the country’s tax net and integrate the various data platforms in Nigeria such as the National Identification Number (NIN), Bank Verification Number (BVN), the Permanent Voters Card (PVC) amongst others into one central data platform.
Udeagbala said even though, “NACCIMA and indeed the Organised Private Sector of Nigeria (OPSN) are not against subsidy removal from fuel; however, we are concerned about the impacts of the subsidy removal on our businesses, which are already burdened with so much economic pressures and difficulties, leading to the shutdown of many SMEs and more unemployment in the country.
“The greater challenge is that government has not shown any tangible productive plan to cushion the impacts of the subsidy removal other than to borrow additional $800 million (statistically translating to N8000 per ordinary Nigerian) which, according to them is meant to cushion the impact of the fuel subsidy removal.
“The NACCIMA calls on the federal government to urgently fix our four refineries, which remained comatose for the past 16 years to end the importation of petroleum products into the country.
“Aside from production of basic fuel products (PMS, Diesel, etc), there are other heavier distillates and by-products of these refineries, which are also critical inputs for industries such as LPFO, SRG, carbon black, etc.
“This, we believe, will help to generate further employment opportunities for our citizens, particularly the teeming youths. It will also address the impact of fuel subsidy removal without adding additional debt burden on the nation.
“Besides, our ability to provide some basic raw materials internally will help our industries to compete better to benefit from the African Continental Free Trade Agreement (AfCFTA).”
NACCIMA also noted that the 2023 population census initially scheduled for May this year could not have come at a better time. “It will be the first digital census to be carried out in Nigeria and it is hoped this will meet global best standard.
“The NACCIMA calls on the government to use the opportunity of this census to harmonise the various data platforms, such as NIN, BVN, PVC etc. into one central data platform. NACCIMA sees this census as an opportunity for government to widen the tax base of the population in the country instead of increasing tax rates and multiplying taxes on the already over-taxed few individuals and OPSN companies,” NACCIMA’s president said.
The chambers’ association also drew the attention of the federal government to the deteriorating ease of doing business in the country in spite of the progress the President Muhammadu Buhari’s administration record in enhancing the EODB during its first tenure.
It also warned against the planned increase of the VAT from 7.5 per cent to 10 per cent, which it described as one increase to many at the detriment of micro businesses and SMEs.
Udeagbala said potential of the country’s mining sector have remained largely untapped in spite of its continued meaningful contribution to the national GDP and growth of the Nigerian economy.
He said: “The organised private sector is worried about the several issues, which have remained as constraints to the growth of the sector, including poor infrastructure, weak regulatory framework and institutions, lack of oversight, lack of best practices and lack of data.
“Furthermore, concerns over illegal mining, lack of protection for legal miners as well as the dichotomy between federal and state governments have all contributed to constraining investments in the sector. We call on the government to promote investment in this sector through provision of necessary infrastructures and policies that enhances ease of doing business in this sector.”