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Economy in danger as subsidy removal triggers deeper crisis



Economy in danger as subsidy removal triggers deeper crisis

Efforts by the Federal Government to attract more investments into the country’s oil and gas sector appear to be under serious threat, with recent developments suggesting a disturbing opacity in the purportedly restored fuel subsidy regime of the President Bola Tinubu-led administration.

Despite the removal of subsidy on the premium motor spirit, otherwise known as petrol, Nigerians woke up on Tuesday (June 4), to a report quoting the government as saying that fuel subsidy is projected to reach N5.4 trillion by the end of 2024, comparing unfavourably with N3.6 trillion in 2023.

The projection is contained in a draft copy report of the Accelerated Stabilization and Advancement Plan (ASAP) presented to President Bola Tinu[[[bu by the Minister of Finance and Coordinating Minister of the Econo[my, Mr. Wale Edun.

“At current rates, expenditure on fuel subsidy is projected to reach N5.4 trillion by the end of 2024. This compares unfavourably with N3.6 trillion in 2023 and N2.0 trillion in 2022”, the report stated.

This is conflicting with Tinubu’s pronouncement in his inaugural address on 29 May 2023 that fuel subsidy was gone. While that major policy step was believed to have relieved the government of a huge financial burden, it pushed the fuel price from N197 to between N480 and N570, triggering a rise in transportation fares and prices of goods and services in the country.

The petrol pump price was subsequently reviewed upward in July 2023, to N587/litre at various outlets of the Nigerian National Petroleum Company Limited (NNPCL).

Serial denial

However, there have been speculations that the government had partly reintroduced petrol subsidy, unannounced, to keep the pump price at N587 given the continued fall in the value of naira against the dollar and the price of crude oil in the international market. This, the government had repeatedly denied.

On 6 October 2023, Festus Osifo, National President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), insisted that the Nigerian government had restored the subsidy on petrol despite the official government policy of ending the subsidy regime.

According to Osifo, due to the cost of crude oil in the international market and the exchange rate, the government still pays subsidies on petrol.

“The government has to come clean. In reality, today, there is a subsidy, because, as of when the earlier price was determined, the price of crude in the international market was around less than $80 a barrel. But today, it has moved to about $93/94 per barrel for Brent crude. So, because it has moved, the price (of petrol) also needed to move,” Mr. Osifo said.

In its reaction at the time, NNPC Limited said the Nigerian government has not resumed payment of subsidy on petrol.

“No subsidy whatsoever. We are recovering our full cost from the products that we import. We sell to the market, and we understand why the marketers are unable to import,” Mr. Kyari told State House correspondents after a meeting with the President at the Presidential Villa, Abuja.

“We hope that they do it very quickly, and these are some of the interventions the government is doing. There is no subsidy.”

Again, in April, former governor of Kaduna State, Nasir El-Rufai, said whether the government admits it or not, the landing cost of petrol shows that there is a form of subsidy being paid.

He said: “Asiwaju (President Bola Tinubu) announced withdrawal of fuel subsidy on 29th May , but, believe it or not , fuel subsidy is back, we’re spending more now, about N8 trillion on subsidy than before 29th of May, El-Rufai, said while delivering a lead paper at the occasion of Capacity Building Workshop on Enhancing Skills of Government Officials in Policy Implementation and Productive Human Resources Management.


The Minister of Budget and Economic Planning, Atiku Bagudu, in a recent interview with an influential online medium, maintained that Tinubu’s administration has scrapped subsidies on petrol.

He referred to the Petroleum Industry Act, which gave autonomy to the NNPC Ltd, as well as the policy decision of the Tinubu administration not to pay subsidy on petrol.

There is a “public policy decision, rightly, commendably and boldly, that we can’t as a nation afford fuel subsidy,” Bagudu had said.

“The policy has been effected and is still being effected. But sometimes, people are confusing the two elements. Many people are confusing price movements and policy decisions. Our policy on fuel subsidy stands. But we don’t control the daily movement of prices,” he said.

But contrary to Bagudu’s claim, the International Monetary Fund (IMF), in a report published shortly after, said the Nigerian government reintroduced petrol subsidy at the end of last year (2023). The Fund said subsidy payment is expected to gulp almost half of Nigeria’s projected oil revenue this year.

“The implicit subsidy will cost Africa’s largest crude producer an estimated N8.43 trillion of its projected N17.7 trillion of oil revenue,” the IMF said in the report.

The bank said Nigerians should be paying about N750 per litre as against the current average price of N600 in some parts of the country.

Similarly, the World Bank’s lead economist for Nigeria, Alex Sienaert, during his presentation of the Nigeria Development Update (NDU), December 2023 Edition in Abuja , insisted that the current fuel prices in Nigeria were not cost-reflective and that the Federal Government might still be paying subsidy on petrol. According to him, Nigerians should be paying about N750 per litre as against the current price of N650 in some parts of the country.

He stated, “It does seem like petrol prices are not fully adjusting to market conditions. So, that hints at the partial return of the subsidy if we estimate what is the cost reflective of the retail PMS price of the would-be and assume that importation is done at the official FX rate.

“Of course, the liberalisation is happening with the parallel rates, which is the main supplier, the price would be even higher. These are just estimates to give you a sense of what cost-reflective pricing most likely looks like.

“We think the price of petrol should be around N750 per litre more than the N650 per litre currently paid by Nigerians.”

But speaking in an interview on Channels TV Morning show, Minister of Information and National Orientation, Mohammed Idris, stressed that government was no longer paying any subsidy on petrol.

He stated, “Subsidy is gone, and the President told Nigerians from his first day in office that there won’t be subsidy (on petrol). It is because subsidy has gone that we have so much money available for government to do so many things. Of course, it’s never enough, but fuel subsidy is gone and it’s gone for good.”

However, the recent draft document of Accelerated Stabilisation and Advancement Plan” (ASAP) emanating from the Ministry of Finance is seriously questioning the credibility of the serial denials of a clandestine return of subsidy payment.

But, like in the past, the Federal Government has maintained that there is nothing like subsidy reintroduction. The Presidency on Thursday urged the public to disregard the revealing documents in circulation, saying they were not authorised by the Federal Government.

The Special Adviser to the President on Information and Strategy, Bayo Onanuga, in a statement, also appealed for a halt to further discussions on the documents.


“The attention of the Presidency has been drawn to two fiscal policy documents in circulation that are being given wide coverage by the mainstream media and social media platforms”, Onanuga said.

He urged the public to disregard the two documents, saying that none was an approved official document of the Federal Government, as they were all policy proposals that were still subject to reviews at the highest level of government.

Dangerous secrecy

Meanwhile, the Peoples Democratic Party (PDP) presidential candidate in 2023, Atiku Abubakar, has alleged that the Tinubu administration was diverting public funds through petrol subsidy, hence the refusal of the government to reveal how much is being spent on subsidy.

Atiku, through a statement by his media aide, Paul Ibe, said the clandestine subsidy regime was one of the reasons investments in the oil sector had refused to come in.

The former vice President said, “Tinubu has brought the shady nature of running Lagos to the federal level. He claims subsidy is gone but his Special Adviser on Energy, Olu Verheijen, says they are intervening from time to time, while his Finance Minister, Wale Edun, described subsidy removal as an ‘ongoing process’. A document authored by the Coordinating Minister of the Economy revealing how much subsidy is being paid is now being disowned by the very authors of the document.

“For a man, who claims to be on a mission to attract foreign direct investment, it is ironic that he cannot see that his policy flip flops and lies are capable of dissuading investors. He must come clean on this subsidy issue since he doubles as petroleum minister. The Tinubu administration should be courageous enough to own their policies and outcome with their full chest and responsible enough to be accountable for their actions to Nigerians.”

Also, a Lagos businessman and social commentator, who spoke under the condition of anonymity, wondered why a subsidy regime would be shrouded in secrecy if it is in the interest of the nation.

”I think the media, the civil society and other major stakeholders should do a lot more to unearth the real truth in this whole debacle”, he said.

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