A professor of Economics and Public Policy at the University of Uyo and the Chairman of the Foundation for Economic Research and Training, Prof Akpan Ekpo, said the government needed to provide a form of mechanism that would help reduce the effect on the poor.
He said, “There should be a gradual phased-out removal of the fuel subsidy. The removal will make all prices go up. There would be structural inflation because the economy depends on oil and the whole structure of the economy would be affected by the removal of the subsidy.”
Fuel subsidy putting pressure on govt revenue, its removal becoming unavoidable – LCCI
The Director-General of the Lagos Chamber of Commerce and Industry, Dr Chinyere Almona said that the removal of subsidy was becoming more unavoidable looking at the pressure it placed on government revenue.
She said the chamber had always advocated the need to have a fully deregulated oil and gas sector in Nigeria with cost-reflective pricing for the oil products. Spending up to N250bn monthly on fuel subsidy at a time when the debt to revenue ratio was above 73 per cent, according to her, was not economical.
She said that an immediate implication of removing the subsidy would be the increase in transport and logistics which would translate into higher costs for goods and services, rising inflation, increased poverty from diminishing purchasing power, and a likely rise in the unemployment rate.
“However, with more money freed for other purposes, the government should be able to spend more on utilities to cushion the effects of the removal. With cost-reflective pricing, smuggling of the products to neighbouring countries will reduce due to reduced margins.”
Almona also raised a concern about the plan of the Federal Government to disburse N5,000 to 40 million poor Nigerians.
She said, “On the proposed N5,000 to be given to some people, we always wonder how the selection is made and from what database or register. What is the guarantee that the money will end up with the right people needing the intervention? One of the biggest problems with our social investment programmes is that we do not have a systematic methodology on how beneficiaries are selected.”
Cost of doing business will increase, fuel-induced inflation inevitable – MAN
The Director-General of the Manufacturers Association of Nigeria, Mr Segun Ajayi-Kadir in a statement said, “Regardless of the arguments back and forth on the issue, PMS remains a commercial product. It is therefore not insulated from the laws of demand and supply.
“From an economic point of view, and that is the area I am comfortable to talk about, it should not come as a surprise. The rise in the price of crude oil should signal the inevitable increase in the landing cost of PMS in the country. You have oil marketers importing the fuel with the need to recover their costs and make a profit. Taken together, it is inevitable that the pump price of PMS will increase.
He however, said fuel-induced inflation might arise. “The increase in the cost of transportation – and the multiplier effect on other costs – that will accompany the more than 100 per cent increase will erode the disposable income of the average Nigerian.”
He said it would also increase the cost of doing business for manufacturers and small business owners.
On his part, the Deputy President of the Nigeria Labour Congress, Joe Ajaero, described as illogical the planned payment of N5,000 palliative after the removal of petrol subsidy.
Ajaero, however, told The PUNCH that the matter would be discussed by the NLC at a larger meeting.
NLC rejects subsidy removal, says it’s a foolish gamble
Also, the congress in a statement on Wednesday by its President, Ayuba Wabba, rejected the planned fuel subsidy removal.
It said the government’s thoughts on the move was cloudy, describing it as a ‘penny wise pound foolish gamble.’
The congress described the move as a recipe for aggravated hyper-inflation.
In a statement titled, ‘Nigerian workers refuse to take the bait,” the congress said, “The contemplation by government to increase the price of petrol by more than 200 per cent is a perfect recipe for an aggravated pile of hyper-inflation and astronomical increase in the price of goods and services.
“This will open a wide door to unintended social consequences such as degeneration of the current insecurity crises and possibly citizens’ revolt. This is not an outcome that any sane Nigeria wishes for.”
Wabba said the discussion between the Federal Government and the World Bank is a monologue, adding that the NLC would continue to insist on its rejection of deregulation based on import-driven model.
The NLC President said it was difficult to convince Nigerian workers why the country is the only nation among the Organisation of Petroleum Exporting Countries that could not produce its own refined petroleum products and thus adopts the neo-liberal import production model of refined petroleum products.
He added, “We wish to reiterate our persuasion that the only benefit of deregulation based on import-driven model is that Nigerian consumers will infinitely continue to pay high prices for refined petroleum products.
“This situation will definitely be compounded by the astronomical devaluation of the naira which currently goes for N560 to US dollars in the parallel market. Thus, any attempt to compare the price of petrol in Nigeria to other countries would be set on a faulty premise as it would be akin to comparing apples to mangoes.”
“We wish to warn that the bait by government to pay 40 million Nigerians N5,000 as palliative to cushion the effect of astronomical increase in the price of petrol is comical, to say the least.
“The total amount involved in this queer initiative is far more than the money government claims to spend currently on fuel subsidy. Apart from our concerns on the transparency of the disbursement given previous experiences with such schemes, we are wondering if government is not trying to rob Nigerians to pay Nigerians? Why pay me N5000 and then subject me to perpetual suffering
“Clearly, government thoughts on the so-called removal of fuel subsidy is cloudy and appears to be a “penny wise-pound foolish” gamble. It is clear that the palliative offered by government will not cure the cancer that will befall the mass of our people who suffer the double jeopardy of hype-inflation while their salaries remain fixed.”
The Senate also faulted plans by the N5,000 to 40 million Nigerians as transportation expenses.
But the Chairman, Senate Committee on Finance, Senators Solomon Adeola, told journalists on Wednesday that there was no provision for N5,000 for the said monthly stipend for 40 million Nigerians, in the 2022 budget currently before the National Assembly.
He said the executive would have to bring the proposal to the parliament for approval before it could start its implementation.
He said there is no way the executive would take a unilateral decision on a programme that would gulp N2.4tn without getting the approval of the parliament
He also queried the criteria that the executive would use to determine the beneficiaries of the transportation allowance.
Health workers under the aegis of the Joint Health Sector Union also cautioned the Federal Government over the proposed increase in fuel prices.
The spokesperson for JOHESU, Olumide Akintayo in an interview with one of our correspondents advised the Federal Government to look for other alternatives to solve the issues surrounding the fuel subsidy.
Meanwhile, the Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, has revealed that with zero remittance from the Nigerian National Petroleum Company to the federation, the Federal Government can no longer sustain petroleum subsidy costs which are currently about N250bn monthly.
Ahmed disclosed this while briefing State House Correspondents on Wednesday after the week’s Federal Executive Council meeting presided over by the President, Major General MuhammaduBuhari (retd.), at the Presidential Villa, Abuja.
By Sunday Aborisade, Friday Olokor, Adelani Adepegba, Okechukwu Nnodim, Amarachi Orjiude, Sami Olatunji, Dayo Adenubi, Deborah Tolu-Kolawole, Stephen Angbulu and Solomon Odeniyi