The Federal Government may begin gradually removing the gasoline subsidy in April 2023, roughly three months ahead of the planned intention to completely eliminate the spending head.
Mrs Zainab Ahmed, Minister of Finance, Budget, and National Planning, hinted at this on Tuesday during an interview with ARISE TV on the sidelines of the World Economic Forum in Davos, Switzerland. She also stated that the removal of subsidies appears to be the position of all candidates for the country’s leadership in their political campaigns for next month’s general elections.
She stated: “What will be safer is for the current administration to, maybe at the beginning of the second quarter, start removing the fuel subsidy, because it’s more expedient if you remove it gradually than to wait and move it all in one big swoop”.
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The Federal Government intends to spend N3.35 trillion on petrol subsidies from January to June 2023, following an 18-month extension.
The extension, however, sparked widespread debate about the necessity of such expenditure, as it will increase the FG’s budget deficit, which will be financed through additional borrowing, resulting in a further increase in the nation’s public debt, which stood at N44.06 trillion as of September 30, 2022.
According to the World Bank and the International Monetary Fund, one of the fiscal reforms most urgently needed to improve Nigeria’s development outcomes, which are badly hampered by inefficient resource utilization, is the elimination of gasoline subsidies.
Speaking in this regard, World Bank President, Mr David Malpass, said: “Nigeria’s government urgently needs to strengthen fiscal management, create a unified, stable market-based exchange rate, phase out its costly, regressive fuel subsidy and rationalize preferential trade restrictions and tax exemptions.”
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He spoke while commenting on a World Bank report launched in November last year, titled: “Nigeria Public Finance Review: Fiscal Adjustment for Better and Sustained Results,”
Similarly, the IMF, in a statement at the end of its Article IV consultation with Nigeria in November, said: “Directors also urged the removal of untargeted fuel subsidies, with compensatory measures for the poor and transparent use of saved resources. They stressed the importance of further strengthening social safety nets.”
During the interview, the minister stated that the petrol subsidy regime must be ended because it generates cash for the government.
“Where there is not enough revenue for the government to buy the refined petroleum products, we have had to borrow to buy the petroleum products. So, if we take that out, that is about N3.25 trillion. That is a significant relief, that we do not incur any more than that number that we projected for in 2023,” she said.
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When asked if she felt deceived that the gasoline subsidy had not been abolished despite her best efforts, she stated that it was a collaborative choice to keep the payments.
‘’Betrayed? No. It was a decision that was taken as a collective, recognising the fact that due to the lingering impact of the COVID-19 pandemic, and also heightened inflation, the removal of the fuel subsidy at that time, would have increased more burden on the citizens,” Ahmed said.
She also stated that President Muhammadu Buhari does not want to adopt actions that will deepen the country’s economic woes.
“The president does not want to envisage a situation where actions are implemented that will further burden the public,” Ahmed said, expanding on the FG’s position.
As a result, the decision was made to prolong the time from June 2022 to 18 months, beginning in January 2022.
‘’So, in June 2023, we should be able to exit. The good thing is, we hear a consistent message that everybody is saying this thing needs to go. It is not serving the majority of Nigerians.
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On the future of the subsidy debate, Ahmed said, ‘’I listened to some of the new leaders that are campaigning for the next round of leadership in the country that is saying they will get rid of it very quickly.
‘’What will be safer is for the current administration to maybe at the beginning of the second quarter to start removing the fuel subsidy because it’s more expedient if you remove it gradually than to wait and move it all in one big swoop.
‘’So, the idea for us in the budget, is that the subsidy costs should not exceed that N3.23 trillion. So, whether it’s done completely 100 per cent by June or by July, or whatever, it’s a process.”
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