The removal of the fuel subsidy has been postponed, according to Zainab Ahmed, Nigeria's minister of finance, budget, and national planning.
She made the announcement in the Council Chambers of the Presidential Villa in Abuja, on Thursday as she noted that the National Economic Council had decided that the fuel subsidy should "not be removed" as originally anticipated for June 2023.
“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, as this preparation has to be done in consultation with the states and other key stakeholders including representatives of the incoming administration,” the minister said.
“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,” she added.
For a little over a year now, the removal of fuel subsidy has been a hot topic of debate within Nigeria’s legislative halls. Reputable economists have also taken a dig at the subject, debating amongst themselves the viability of the idea.
While most members of the current administration are in support of the removal of fuel subsidy, some economists and thought leaders have argued that the removal would not bode well with the masses.
The Nigerian government has argued for months now that the inclusion of fuel subsidy in the national budget constitutes an unnecessary strain on the country’s resources. The Nigerian National Petroleum Company Limited (NNPCL) noted that fuel subsidies as of February 2023 costs an estimated N400 billion monthly, a massive sum that can be allocated to other areas of development.
While this alarming figure is enough to make a case for fuel subsidy removal, it can also be debated that the subsidy stabilizes the economy in its own way.
In retrospect, the counter argument is that the removal of subsidies is only going to increase the cost of living, owing to the fact that energy prices would skyrocket. Nigeria is already dealing with a 22.04% inflation rate. Should things get more financially inconvenient for the average Nigerian, particularly now when the country is on the verge of swearing in a new president, tensions might escalate, as evidenced by the fact that the finance minister attributed the postponement of the implementation of the policy to bad timing due to heightened inflation.
The finance minister also cited the need to roll out new and current refineries, lower the volume of goods being imported into the nation, and conduct further stakeholder discussions, as reasons why the removal of fuel subsidy was suspended.
Prior to this new development, the federal government made adequate provision in the 2022 national budget for subsidy payment till June and as such concluded plans to remove fuel subsidy from July 2022, according to Zainab Ahmed.
The topic of the removal of fuel subsidies has been a massively contentious one, and the suspension of this directive is sure to buy the new administration enough time to figure out the best course of action, and or the best way to go about the removal when they eventually decide to eliminate fuel subsidies.