The issue of fuel subsidy removal is again on the front burner as the current administration insists that the provision for subsidy will end in June.
Going by that arrangement, it means the incoming administration of Bola Ahmed Tinubu will have to manage the fallout of the fuel subsidy removal, as the Nigeria Labour Congress has voiced opposition to the move, adding that for it to give partial support, the Buhari administration and by extension, the incoming administration of Tinubu will have to make sure that the refineries work and fuel refined locally.
Aside the fallout of the presidential election, no other matters have etched themselves on the front burner of national discourse ahead of the inauguration of a new government come May 29, 2023 as the subsidy removal matter. The issue of subsidy has been a contentious matter in the last three decades with each successive governments trying to weather the storm.
Last week, the minister of finance and National Planning, Mrs. Zainab Armed, said the country has obtained an $800 million facility from the World Bank to cushion the effects of subsidy removal. This, she said, will target 50 million most vulnerable Nigerians through cash transfers and other palliatives.
The former president Goodluck Jonathan in 2012 made attempts to remove the subsidy, but his move proved abortive as the opposition party mobilized the organized labour and the civil society organizations, to resist it.
Labour and others opposed to the removal hinged their stance on the fact that it would make life difficult for ordinary Nigerians already pauperized by bad economic policies.
Although government says the June timeline for removing the subsidy is sacrosanct, but the Labour has threatened a showdown the country should the Buhari administration or the incoming Tinubu administration proceed with the removal without putting in place the mechanism to revitalize the refineries.
Many analysts say the subsidy may be one big challenge that has the capacity to throw the nation into another round of unavoidable crisis in the thick of the handover to a new administration.
“My personal take is that the Buhari administration should leave the issue of fuel subsidy removal to the new administration to decide. If the current administration proceeds with the plan it will throw the nation into another crisis. We all know how sensitive the issue of subsidy is, and now that Labour is insisting on certain conditions being met like putting in place mechanism for refineries to work”, Prof. Adeagbo Moritiwon, a political scientist told Business Hallmark.
But the government insists that the current subsidy regime is unsustainable, and this position finds validation among stakeholders and informed analysts like Dr. Muda Yusuf.
Zainab Ahmed, Minister of Finance, Budget and National Planning said , “the subsidy cost per litre of petrol ranged between N350 to N400, maintaining that Nigeria spends about N250 billion monthly on subsidy.”
She said this during a courtesy visit to the Voice of Nigeria in Abuja, where she attributed the delay in removing the subsidy, as provided for in the Petroleum Industry Act (PIA) 2021, to the 2023 general election and the forthcoming national population census.
“Right now, we have approval within the Appropriation Act to exit the subsidy by June 2023. Or at least, I can say, the Appropriation Act made a provision that only allows subsidies up to June 2023,” she stated.
Last week, it was widely reported that about 25 shipments of the country’s crude for April were still on the look out for buyers, with cargo reported to contain about a million barrels of oil.
But in a Channels Television interview penultimate week, the Minister of Labour and Employment, Chris Ngige, told Nigerians that the government would hand over the implementation of petrol subsidy removal and palliative measures to the incoming administration.
Organized Labour has vowed to resist the removal, saying the N30,000 minimum wage is still contentious– not to talk of removing the so- called subsidy which the Labour itself calls a scam. Many states are yet to comply with payment. The position of Labour is that it will affect the standards of living, deepen poverty and drive up crime as many would resort to criminal activities to survive.
Moritiwon agrees with the position of Labour, only last year, a report by the Nigeria Bureau of Statistics (NBS) stated that about 133 million Nigerians live in multidimensional poverty. The figure represents 63 per cent of the country’s population.
Labour says once the government can repair refineries and allow modular refineries and only act as regulator , they will give their support to the removal. They also expect a commensurate increment in minimum pay for workers.
An indication that the incoming government will toe the Buhari line on subsidy removal and even adopt a more hardline position had earlier emerged before the election.
Tinubu, while speaking pre- election, at the business luncheon with business owners titled: “Business Forward” in Lagos, stated unequivocally that, no matter how long people protest, it would not stop him from removing fuel subsidy. Tinubu maintained that Nigeria would not continue to subsidize fuel consumption in neighbouring countries.
“How can we subsidise the fuel consumption of Cameroon, Niger, and the Benin Republic. No matter how long you protest, we are going to remove the subsidy,” he had said.
The Minister of State for Budget and National Planning, Clement Agba, confirmed this when he said after the Federal Executive Council meeting held on March 15 that a committee headed by Vice-President Yemi Osinbajo had been working for about a year on how to lessen the impact of subsidy removal, but nothing concrete had been agreed upon.
The Labour may be poised for a fight. According to NLC, the focus should be on the local refining of petroleum products and not subsidy removal. Government had pinned it’s hope on the commissioning of the Dangote Refinery, which postponed several time due rising project cost from foreign exchange challenges. Last month, the company issued a N300 billion local bond to complete the project.
Last week, General Secretary of NLC, Emma Ugboaja, in a chat with journalists in Lagos, said Nigerian masses and workers should not be drawn into any increase in fuel price in the name of subsidy removal, insisting that organized labour will not accept it.
“It will be uncharitable in 2023 for any government to talk about subsidy or no subsidy for a product that is naturally and thoroughly well-endowed in Nigeria. It smacks of wickedness for us to be discussing subsidy as an issue, rather than discussing production.
‘’The energy and resources people are putting into discussing subsidy show a lack of focus. It shows a lack of seriousness and a lack of appreciation of what governance should be. If in 2023, rather than getting people that will make proper use of our natural endowment, we are busy discussing the cosmetic challenge of subsidy or no subsidy, it is absurd.
“One would have thought that people should be setting before the incoming government a genuine challenge on how to move Nigeria forward, not for us to continue in the rigmarole of vicious, musical chairs and absurd comedy of subsidy or no subsidy. We cannot be people that do not respond to records.
“It is an open thing that the government that is about to leave in 2016 told Nigerians they had removed the subsidy. Despite the NLC’s position that there was no subsidy to remove and that what people were harping on was a price hike. They had told us that they removed the subsidy in 2016, so what subsidy are they removing or are we discussing now?
But the chairman of the Major Oil Marketers Association of Nigeria, MOMAN, Olumide Adeosun has a different take. Adeosun stated that major marketers believed that subsidy was not sustainable as it had over the years stifled investment and growth in the sector.
“We need full deregulation in line with the provisions of the Petroleum Industry ACT, PIA. The legislation is ultimately the best for the nation.”
“We have always been opposed to petrol subsidies. We believe that subsidy will cease to be once the downstream sector is deregulated.
“This is required to conserve funds currently expended on subsidy as well as attract serious investors to invest, thus growing the sector.”
Dr. Muda Yusuf, the Chief Executive Officer, the Centre for the Promotion of Private Enterprise, agreed with him, saying : “It is clear that the current petrol subsidy is fiscally unsustainable.
“But there is a need to creatively manage the transition from the current pricing regime to a fully or partially deregulated arrangement. It is a tricky issue which could pose a serious challenge to the government if not tactically managed.
‘’The reality is that the sentiments among the citizenry are not favourable to the deregulation of petroleum product pricing or petrol subsidy removal. Even some elites are curiously not persuaded by the justification for the subsidy removal.
“If the policy transition is not properly managed, there is a risk of a social and political backlash which may be difficult to contain. No doubt, there is a sound economic and business case in favour of fuel subsidy removal.
‘’But the social and political contexts are equally critical. The subsidy is not sustainable, which is why there is a need to accelerate engagement with the relevant stakeholders to come up with a policy transition strategy that is sustainable, realistic and pragmatic. The conversation should not only be economic, but also social and political.”
“We need to expeditiously address the ongoing rehabilitation of our refineries. Domestic refining of petroleum products will ease the currently prohibitive cost of petroleum products which is largely a consequence of our vulnerability to volatility in global oil prices and currency depreciation. The Dangote Refinery should also be supported to ensure early completion.”