…We only expanded the subsidy removal committee – Finance Minister
…Government should return the money – expert
There is confusion over the fate of the $800 million World Bank loan secured by the Federal government to be disbursed as palliatives to 50 million Nigerians in 10 million households. This follows the suspension of the subsidy removal by the National Economic Council (NEC).
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed had announced to reporters about two weeks ago that the federal government has secured an $800 million facility from the World Bank to provide post-petroleum subsidy palliatives for over 50 million Nigerians in 10 million households.
Many Nigerians had reacted to this announcement wondering why a government that has less than four weeks to go should concern itself with the disbursement of palliatives for subsidy that is to be removed by another government.
A new twist has been added to the controversy as the National Economic Council (NEC) last Thursday was said to have suspended the planned removal of subsidy on petroleum products to allow for more consultations and planning.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed this to State House correspondents shortly after the valedictory Council meeting presided over by Vice President Yemi Osinbajo at the Presidential Villa, Abuja.
Ahmed explained that although the removal of fuel subsidy was imminent, the council decided that the timing for the removal of subsidy should not be now.
She said the council agreed on the need to continue the discussion on the matter and the necessary preparatory work in conjunction with states and representatives of the incoming administration.
According to her, “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.
“Council agreed that the fuel subsidy must be removed earlier rather than later because it is not sustainable. We cannot afford it anymore. But we have to do it in such a way that the impact of the subsidy is as much as possible, mitigated on the lives of ordinary Nigerians.
“So, this will require looking at alternatives to the fuel subsidy that needs to be planned for and subsequently put in place. But also what needs to be done to support the people that will be most affected as a result of the removal.”
But following the public reaction that trailed the decision by NEC, Ahmed came up with a statement denying the suspension of the subsidy removal and claimed that what was done was simply to expand the subsidy removal committee to include teams from the incoming administration and the state governors.
She said that NEC deliberated on the issue extensively and came to the conclusion that the subsidy must be removed as it is not sustainable, but there is a need for further consultations and also the need to involve members of the incoming administration and representatives of the States.
The present administration in 2015 campaigned that it would remove the subsidy if it was elected into power. Eight years down the line, the government has not had the nerve to remove the subsidy and the country has been paying heavily to subsidise petroleum products.
A recent Nigerian Extractive Industry Transparency Initiative (NEITI) report submitted to the House of Representatives ad hoc committee investigating the fuel subsidy regime from 2013 to 2022, showed that fuel subsidy has jumped from N316.7 billion in 2015 to well over N3.6 trillion in 2023.
Nigeria has struggled with rising budget deficits driven mainly by rising fuel subsidy figures.
President Muhammadu while presenting the 2023 budget to the National Assemble last year said that the subsidy regime must cease for the country’s economy to blossom. He warned that the subsidy regime must stop to save the Nation’s economy from avoidable bleedings on yearly basis.
But the government cleverly decided to fix the terminal date of the subsidy regime for June 2023, a month after it has handed over to another administration. This decision has been described in some quarters as shifting responsibility since it did not have the courage to remove the subsidy in eight years, why impose it on another government?
Nigerians even when they agree that subsidy must go, had expressed reservations on the date set for the removal by this government. According to the founder/CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, there is no way the new administration will come on may 29 and announce subsidy removal, “it is not possible,” he said, adding, “They have to sit down, look at the numbers and all of that, and also engage the people as a new administration. This is not something you do in a week or two, you need some time to be able to do them and lay down how you want to transit from the current policy regime that you met.”
It was therefore not surprising when the news came that the subsidy removal has been suspended by NEC. The truth remains that even when the new administration has said it will remove the subsidy, it may not be a decision that will be taken in a hurry. Recall that in 2015, Buhari made the same promise, but for eight years he lacked the gut to fulfill it.
“CPPE’s view is that all matters relating to petrol subsidy removal should be left for the incoming administration to handle,” Dr. Yusuf said, adding, “This should be the default position since the current government has announced a budgetary provision for fuel subsidy up till June 2023. This is also the position of the Petroleum industry Act as amended. Rather than stir another round of controversy and confusion, the matter ought to be left for the new administration.”
He said the announcement by the NEC was really unnecessary.
According to him, “My expectation is that the new administration should have its strategy of managing the policy transition. This should not be preempted by the current administration.
“The National Economic Council should avoid making policy pronouncement that may create problems for the new administration. I also expect that some level of informal consultation should have commenced between the transition team of the incoming administration and key stakeholders on the matter.
“The APC had categorically stated that it would remove petrol subsidy on assumption of office. Although it had not unveiled its strategy of doing so.”
For Eze Onyekpere, an economic analyst, “This is a policy reversal that signifies the failure of the All Progressives Congress federal administration.”
He said that the expectation was that far-reaching consultations and groundwork nearing a roadmap on fuel subsidy removal would have been left by the current administration for the incoming one.
“No, but what do we expect from an irresponsible government? Always living in denial and perpetually blaming the previous government for its failures. It is the height of governance and fiscal irresponsibility,” Onyekpere said, adding, “If the incoming administration builds on the Buhari legacy as promised, then all hope may be lost. The decision is irrational, makes no sense and it is a decision against the run of fiscal and macroeconomic indicators.”
Speaking on the fate of the borrowed $800 million, Professor Titilayo Fowokan, said, “The government should now be looking at returning the borrowed money to reduce our debt profile. It makes no sense keeping it because it surely must be diverted into private pockets.”
She said, “In the first instance, I do not think borrowing for palliatives to the poor for fuel subsidy issues is sustainable considering the level of debt that Nigeria has already incurred.”
She said addressing the plight of the poor and vulnerable in the economy should be from the angle of developing the economy by creating employment, having workable policies on food security, addressing the need of shelter for the poor, and putting in place social infrastructure for public benefit.
“Our political leaders need to ensure there is a sustainable governance system that is not reactive but proactive in the midst of changing needs of the citizens,” she said.
“Governance should be accountable to all citizens and prudent in the management of the finances of the country. There is the need for the government to consciously work on the country’s debt profile, reduce excesses and block the leakages that are putting the country in the negative financial position of deficit budgets that we have been experiencing.”
However the government chooses to handle the $800 million World Bank loan, it is obvious that the money may not be disbursed to poor Nigerians as planned, but it will surely add to the nation’s debt stock which may hit N77 trillion by the time this administration ends on May 29, 2023.