FG shelves fuel subsidy removal

Good news to everyone in Nigeria as the federal government has finally shelved the idea of removing petroleum subsidy, at least for now. The 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 which was billed to commence by July this year. This was corroborated by the Minister of State for Petroleum Resources, Chief Timipre Sylva, who stated at a different forum that subsidy paid on the pump price of petrol would remain for now. The suspension follows threats by labour unions in the country to embark on strike to make sure that the any of such implementation is reversed.

The federal government initially planned to remove subsidy on petroleum products from July. This was in line with the provisions of the passage of the Petroleum Industry Act (PIA), that all petroleum products should be deregulated. According the National Executive Council (NEC), the removal of subsidy will see a pump price of fuel rise from the current N162 to about N400. Given the ripple effect of previous increase in the pump price, the cost of transportation would have led to the hike in the price of other products, thereby increasing inflation, a situation that would have further depleted the income of consumers.

for the plan to hold, the government has to seek the intervention of the national assembly to suspend a portion of the PIA, as well as present a budget for the approval of subsidy to the national assembly, to cover subsidy payment from July till a time deemed appropriate for its eventual removal. This will help government not to breach a constitutional as well work towards removing when the people would have made significant arrangements for absorbing the shocks that will come with the removal, such that the impact and consequences will not add to hardship.

The government should use this period to put in measures such as deployment of an alternative to the Premium Motor Spirit (PMS) and also the roll out of enhanced refining capacity in the country, including the 650,000 barrels per day Dangote Refinery and also the rehabilitation of the four national refineries that have a combined capacity of 450,000 barrels per day. Manufacturers should as work out strategies to absorb the expected cost such that the burden of such increase will not be completely transferred to the consumers.