Uncertainty surrounds Nigeria’s fuel subsidy removal plan

Fuel attendant dispensing fuel

Lagos -- Uncertainty is surrounding Nigeria’s plan to remove subsidy on petrol as from next month, with less than 15 days to the official hand over of the affairs of government from the incumbent President Muhammadu Buhari administration to a new regime expected to assume office on May 29.

The government’s plan, as shown in the 2023 national budget, is to fund the expensive but popular subsidy until the end of its tenure and hand over the responsibility to the incoming government to decide what to do as from June. It set aside N3.36 trillion ($7.3 billion) this year to spend on petrol subsidy until June, after which it has made no provision for the expense, which cost more than its spending on healthcare and education. The government went ahead to secured $800 million the World Bank to scale up its national social programme ahead of the subsidy removal.

But, it is currently not clear what will happen to the plan following government’s recent engagement in contradicting and debunking itself on the matter.

Also, organised labour is still opposed to the removal of the subsidy, with oil industry groups saying they would support the move only on the condition that the Federal Government ensured the local refineries in Warri. Kaduna and Port Harcourt are fully functional before such a move.

Rising from a meeting at the Council Chambers of the Presidential Villa, Abuja, on April 27, the National Economic Council, NEC, announced “the suspension of the planned removal of petrol subsidy by the Federal Government as from June this year”.

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, broke the news on the decision of the council to State House correspondents after the meeting, which was presided over by Vice President Yemi Osinbajo.

“Council agreed that the timing of the removal of fuel subsidy should not be now. 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 stated.

The same Ahmed was to do a retraction on the announcement of the suspension of subsidy removal the following day, April 28, saying: “Against the backdrop of the story in some media that the Federal Government has suspended the removal of petrol subsidy, the government has said that it has not suspended the removal, but has rather expanded the subsidy removal committee to include teams from the incoming administration and

the state governors.”

Industry watchers point to the contradiction created by the minister in the two announcements as having created uncertainty on the planned removal of the subsidy, specifically as to when exactly the subsidy removal would happen.

“From the Federal Government’s position, the subsidy can no longer be removed by June. No matter the position of the incoming administration, the reality is that subsidy cannot be removed in June,” said an industry watcher, who spoke to SweetcrudeReports.

The three main contenders to the Nigerian presidency, in the run-up to the February 25 general election – Bola Tinubu of the All Progressive Congress, Peter Obi of Labour Party and Atiku Abubakar of Peoples Democratic Party - all agreed to remove subsidy on petroleum products.

Mr Tinubu, who was declared winner in the presidential race by the Independent National Electoral Commission, would be expected, if sworn-in into office on May 29, to execute his agenda of removing the subsidy.

He would, however, have to contend with organised labour.

For instance, the two industrial unions in the Nigerian oil and gas sector National Union of Petroleum and Natural Gas Workers, NUPENG, and Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN – are both opposed to the removal of the subsidy, so also the Independent Petroleum Markers Association of Nigeria, IPMAN. They said they would support the move only on the condition that the Federal Government ensured the local refineries were fully functional before the move.

“The question is, when will the government be able to revamp the local refineries and bring them to full operation, for it to ensure the support of labour on the matter,” the industry watcher said, adding: “This might take years, which means subsidy removal might have to wait longer than expected if the incoming government would have to do it with the support of organised labour.”