Nigeria Shelves Plan to End Fuel Subsidy from July

Nigeria’s Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, has announced the resolve of the federal government to jettison its earlier plan to remove subsidy on petroleum products from July. Ahmed stated this on Monday at a stakeholders’ meeting held at the National Assembly complex in Abuja.

Minister of State for Petroleum Resources, Chief Timipre Sylva, also stated at a different forum on Monday that subsidy paid on the pump price of petrol would remain for now. Sylva revealed that President Muhammadu Buhari was against fuel subsidy removal.

The stakeholders’ gathering was convened at the instance of President of the Senate, Dr. Ahmad Lawan, who appealed to the labour unions to cancel the protests initially planned over the subsidy.

However, petroleum products marketers in the country warned that the federal government’s decision to shelve subsidy removal would send the wrong signal to the world and foreign investors.

But the ruling All Progressives Congress (APC) commended the federal government for the decision to defer the removal of subsidy, saying ending the policy at this time would cause more hardship to Nigeria.

Meanwhile, organised labour, under the umbrella of the Nigeria Labour Congress (NLC), dispatched protest letters to governors of the 36 states of the federation and the Minister of the Federal Capital Territory FCT, Abuja, expressing its opposition to the proposal by the federal government to increase the pump price of petrol, otherwise known as premium motor spirit (PMS).

The meeting at the National Assembly had in attendance Sylva; Chief Executive Officer of the Nigerian Midstream and Downstream Regulatory Authority, Farouk Ahmed; Managing Director of the Nigerian National Petroleum Company Limited, Mele Kyari; and Chief Executive Officer of the Nigerian Upstream Regulatory Commission, Engr. Gbenga Komolafe.

Others were Special Assistant to the President on Natural Resources, Habib Nuhu; Permanent Secretary, Federal Ministry of Finance, Aliyu Shehu Shinkafi, and Permanent Secretary, Ministry of Petroleum Resources, Nasir Sani-Gwarzo.

The finance minister said the federal government initially planned to remove subsidy on petroleum products from July. She said that was the reason adequate provision was made in the 2022 national budget for subsidy payment till June.

Ahmed explained, “Provision was made in the 2022 budget for subsidy payment from January till June. That suggested that from July, there would be no subsidy.

“The provision was made sequel to the passage of the Petroleum Industry Act (PIA), which indicated that all petroleum products would be deregulated.

“Sequel to the passage of the PIA, we went back to amend the fiscal framework to incorporate the subsidy removal. However, after the budget was passed, we had consultations with a number of stakeholders and it became clear that the timing was problematic.

“We discovered that practically, there is still heightened inflation and that the removal of subsidy would further worsen the situation and impose more difficulties on the citizenry.

“Mr. President does not want to do that. What we are now doing is to continue with the on-going discussions and consultations in terms of putting in place a number of measures.”

The minister said the measures included the rollout of the refining capacities of the existing refineries and the new ones, which would reduce the amount of the products that would be imported into the country.

“We, therefore, need to return to the National Assembly to now amend the budget and make additional provision for subsidy from July to December 2022 to whatever period that we agreed was suitable for the commencement of the total removal,” she stated.

The minister told the meeting that the federal government would soon unfold the palliative being prepared to cushion the adverse effects of subsidy removal whenever it was implemented.

She said, “What we have to do now is to continue with the discussion that we are making in terms of putting in place a number of measures, one of which is the deployment of alternatives.

“The roll out of enhanced refining capacity, including the 650, 000 barrels per day refinery and also the rehabilitation of the four national refineries that have a combined refining capacity of 450 000 barrels per day and also the necessary rehabilitation

“These would increase the refining capacity and means that we will import less

“As we were discussing there is a possibility of amending the budget; we need to come back to the National assembly by way of amendment to make additional provision for fuel subsidy from July 2022 going forward.”

On his part, Sylva said the meeting held behind closed doors agreed that the proposed removal of subsidy on petroleum products should be put on hold till necessary palliatives were put in place. He also said the PIA would be reworked by the federal lawmakers in line with the current reality.

The petroleum minister stated, “The law (PIA) has been passed. We are all aware of that. But there is no law that is cast in stone. It is clear to everyone that at this point, operating the law is not possible within the six months framework that has been provided for in the law.

“It is also a legislative responsibility now to see what could be done in extending that time frame for it to be in the purview of the law.

“Secondly, the other legislative issue arising from it is the provision for subsidy in the budget, which would no longer be there after June.”

Speaking on a national television programme last night, Sylva stated that the federal government was mindful of the effect of subsidy removal on the most vulnerable groups, stressing that removing the subsidisation is unfeasible for now.

He said, “I will tell you categorically that at this moment, the complete removal of subsidy is not in our plate at all. The president is not in support of removing subsidy at this time. So, we are working out other processes.

“We all know that it is a desirable policy direction, but we also know that it will have some impact on the people and until some details are worked out with labour and other stakeholders, we will not remove subsidy. At this time, I can tell you that it is not in our plate at all.”

Sylva also stated that the Dangote refinery would have significant impact on the fuel supply dynamics, including easing pressure on the economy, especially when combined with the on-going revamping of the three refineries in the country.

He said with the Dangote facility and the three refineries in operation, Nigeria could become a net exporter of petroleum products in the nearest further.

On gas, the minister stated that with the full domiciliation of all the gas produced by the Nigeria LNG, prices were beginning to come down. He stressed that the government might back down on the imposition of a 7.5 per cent Value Added Tax (VAT) on imported gas.

“We are trying to see how we can remove VAT and some taxes on imported gas,” he stated.

Sylva maintained that although not a regulated market, government was mindful of the fact that rising gas prices could negatively affect majority of Nigerians.

He added that Nigeria would continue to consolidate its gas resources as a transition fuel, before the extinction of fossil fuels in some decades to come.

The senate president urged organised labour in the country to shelve their proposed nationwide protests slated for Thursday, January 27.

He said such action was no longer necessary.

Lawan said, “I am taking this opportunity to speak to the Trade Union Congress (TUC) and NLC to shelve their plan to go on strike or demonstration. It is totally unnecessary.

“There is not going to be removal of subsidy, so let us not create unnecessary tension where there should be none.

“Please, forget about the 27th of January deadline. We are supposed to come together and work assiduously to see that our country is stable that our people to enjoy the benefits of government programmes and projects.

“At the end of the day, whatever decision we would be taking would be in the best interest of our people. Recall that last Tuesday, I visited the president (Muhammadu Buhari) on the possible removal of subsidy on petroleum products in the country.”

Postponing Subsidy Removal Sends Wrong Signal to Foreign Investors, Oil Marketers Warn

Reacting to the federal government’s withdrawal of its planned removal of subsidy, petroleum products marketers warned that the decision to continue with subsidy payment would send the wrong signal to the international community, especially, foreign investors that might want do business in Nigeria.

Managing Director of 11Plc and immediate-past Chairman of the Major Oil Marketers Association of Nigeria (MOMAN), Mr. Tunji Oyebanji, told THISDAY that the postponement would send out the wrong signal to the global community.

Oyebanji said foreign investors and the world might have a second thought about Nigeria and how it treated issues of law. He stressed that the law stipulated that subsidy should be removed, but the government decided otherwise.

He stated, “How would investors and the world look at us when after a long time, we passed a law saying that subsidy should be removed and, then, we decide not to implement it? Those people will have a second thought about us and the laws that we passed.”

He, however, sympathised with the government, saying the government may be justified in its decision considering the political and economic implications of removing the subsidy this time.

Oyebanji explained, “There are several ways to look at it. One is the political standpoint. I guess it’s just not politically expedient at this point in time, irrespective of the arguments for and against it.

“Secondly, if we go through another #EndSARs arrangement now, you know, it will be very difficult. That is because the tendency is that whenever you have all these protests and things like that, before you know it, Area Boys will hijack it and it becomes something else. And I don’t know whether we are in that kind of environment at this point in time.”

Another petroleum products marketer, who sought to remain anonymous, told THISDAY that the latest information from Dangote Refinery could have informed the government’s decision to postpone subsidy removal.

Dangote Group had announced last weekend that work at its 650,000 barrels per day refinery in Lagos had been completed and that the facility would start running between August and September this year, while full production would begin by year-end or beginning of 2023.

The marketer argued that both announcements from the government and Dangote Group might be a strategy to douse the ensuing tension created by the subsidy issue.

The marketer said, anonymously, “It could be an attempt to take the wind out of the sail of labour. By making this announcement, they would out-smart labour. You never can tell.

“It could be a deliberate strategy. You know, they are already building up and saying they are going on strike. So, this will tactically take the tension away a bit.”

APC: Removal of Petrol Subsidy Will Heighten Inflation, Cause Hardship

APC commended the federal government for suspending the planned removal of subsidy on petroleum products. The ruling party said removing petrol subsidy at this time would heighten inflation and cause undue hardship in the country.

National Secretary of the Caretaker/Extraordinary Convention Planning Committee (CECPC) of APC, Sen. John Akpanudoedehe, said programmes and policies of the government were meant to benefit the people. Akpanudoedehe added that if the timing of the planned subsidy removal would cause hardship on citizens, then a review was necessary

He stated, “We commend President Muhammadu Buhari for always putting the welfare and well-being of Nigerians first, as he has serially displayed in the implementation of programmes and policies of this administration.

“Commendably, the federal government took into consideration the fact that the removal of subsidy at this time will heighten inflation and cause undue hardship on the citizenry.”

Akpanudoedehe said in line with the PIA, the federal government was already putting in place measures, particularly boosting the local refining capacities, to reduce the country’s reliance on expensive import of refined petroleum products. He said this would in due course usher in the eventual and full deregulation of the country’s petroleum sector.

Labour Petitions State Governors over Proposed Hike in PMS Price

NLC notified the governors of the 36 states of the federation and the Minister of the Federal Capital Territory FCT, Abuja, of its opposition to the proposal by the federal government to increase the pump price of petrol.

In the letter signed by NLC President Ayuba Wabba and addressed to the state governors, the labour movement said the protest scheduled for January 27 was aimed at alerting governments at all levels of the sufferings that Nigerians were going through and the additional insufferable trauma that the citizens would be subjected to if the government went ahead with the hike in the price of refined petroleum products.

In the letter, expected to be formally presented to the governors on Thursday, NLC said it stood by the agreement signed with the federal government on September 28, 2020 to freeze further increases in the pump price of petrol.

The MoU with government also agreed to set up a technical committee to undertake a review of the state of local refineries in Nigeria.

NLC said the mandate of the technical committee, which was made up of relevant officers of government and affiliate unions in the petroleum industry, included monitoring and tracking the fulfilment of government’s promises and efforts in terms of actions to revamp the public petroleum refineries.

The union stated, “Unfortunately, after a few weeks of interaction with government on this critical national matter, government suddenly adjourned further discussions sine die. The situation has remained the same for nearly two years now, as government treats inquiries and promptings by organised labour with levity, disdain and contempt.”

While defending its position against the removal of fuel subsidy, NLC stated that under the existing importation price model for refined petroleum products, Nigerians were being forced to pay for all manner of acquired and transferred costs.

It stated that these costs included the profit margin of foreign oil refineries, taxes paid by foreign oil companies, international shipping and logistics costs, product handling costs at the ports, demurrage charges, and import duties on imported petroleum products.

NLC said it preferred Local Production Price Model, which drives industrialisation for self-actualization, would save the local petroleum industry from the volatilities and sometimes conspiracy prevalent in the global commodities market.

It said the country had no excuse for not utilising the comparative advantage of crude oil, its main foreign exchange earner, as a strategic national asset for improving the lot of Nigerian workers and the ordinary citizens of the country.

NLC further said there were well-founded fears that the absence of optimally performing public refineries would eliminate competition and open the doors for monopolies and cartels and at a debilitating expense for the ordinary Nigerian, adding that government has a duty to ensure that this does not happen.

In the protest letter, NLC urged the federal government to re-engage organised labour in discussions in order to find mutually acceptable solutions to the current quagmire in Nigeria’s downstream petroleum sub-sector.

Group Cautions against Planned Protest

A group, Concerned Citizens Project (CCP) Nigeria, described the planned protest by NLC and TUC as misguided, unwise, and self-defeating. It said leaders of NLC and TUC should rise up to their duties and stop playing to gallery or books of some elite benefitting immensely from the petroleum subsidy.

In a statement signed by its National Coordinator, Dr. Bello Musa Gwani, and National Secretary, Sylvester Koni, the group emphasised that the labour unions needed to get their acts together by putting the future and survival of the country first.

The statement said, “The intended strike and protest will put a halt on the operations of government offices, banks, shopping centres and schools, transportation workers and will also significantly affect the informal sectors including markets and local transportation services.

“This will cause an untold hardship on Nigerians and have significant damaging effect on an already struggling economy. Paralysing the country of more than 200 million people, majority of the citizens live on daily wage, will be highly irrational.”

CCP added that considering the delicate security situation in the country, it would be of great concern that provocateurs and anarchists could hijack such protests and demonstrations, or hide under the cover of protestors and promote discord, anarchy and unleash mayhem to the detriment of public peace.

It said, “We have all witnessed how criminal elements hijacked the #EndSARs protest, and the amount of looting and burning that took place, while turning into tribal violence and killings in some states.

“Similarly, politicians and other interests beyond the implementation of the deregulation policy can hijack the national protest to derive personal and selfish agendas.

“It is, thus, imperative for NLC and TUC leaders to avoid putting Nigeria in such delicate security situation. For most oil producing countries, high oil prices mean high government earning, more spending on education, health, infrastructure, poverty alleviation etc.

“Unfortunately, that is not the case in the Nigeria, as the high profit margin earned from high oil price is largely swallowed by petroleum subsidy. If NLC and TUC leaders are not in terms with the proposed stoppage to paying petroleum subsidy, despite the glaring evidences of the failure of the scheme, they can explore other avenues to prevent high petroleum price in the country.

“One important option is to engage with the government to find a more suitable solution. For example, by putting pressure on the government to revamp the three national refineries (in Kaduna, Warri and Port-Harcourt), which can play a significant role in easing the pressure on our forex reserve, thus, strengthening our currency.

“A strong Naira and local refining capacity will make the petroleum products cheap even without subsidies. In addition, if these refineries are revamped, hundreds of thousands of direct and indirect jobs will be created, thus, creating a multiplier effect in the fight against poverty and the growth of our economy.”

Onyebuchi Ezigbo, Emmanuel Addeh, James Emejo, Adedayo Akinwale, Sunday Aborisade in Abuja and Peter Uzoho in Lagos

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