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Tag: fuel subsidy removal

  • ‘Nigerians urged to adapt to current economic realities’

    ‘Nigerians urged to adapt to current economic realities’

    Nigerians have been called upon to adapt to the current economic realities to foster meaningful progress, as fuel subsidies have long hindered the country’s sustainable development.

    This is as Nigerian professionals across various sectors of engineering, law, healthcare, manufacturing, and science, among others, have been urged to uphold ethical standards and contribute actively to addressing the many challenges facing the nation.

    Speaking at the annual meeting of the Association of Professional Bodies of Nigeria (APBN) in Abuja on Tuesday, former President of the association, Akinloye Olufemi Oyegbola, emphasized the need for Nigerians to embrace a culture of good followership, noting that this is essential for fostering accountability and ensuring that leaders are held responsible to the people.

    Oyegbola criticized the unsustainable practice of subsidies, arguing that it has led to financial irresponsibility.

    He stressed that it is better to confront these issues now, rather than wait for them to escalate further, saying, “Right from when we had the COVID, things have been tiring, trying to fall apart, trying to fall apart.

    “I think when we talk, we should be sincere to the people. When you have a family and each of the parents have a job, if one loses the job, there is a need for that family to adjust.

    “And while that family is adjusting, we expect, for instance, the children who were earlier in private schools, now being put in government schools.

    “These are basic things. So I think we are adjusting already. We didn’t want to adjust before.

    “That’s why it got this bad. If we had adjusted as we are adjusting now, in the past, it wouldn’t be this bad for us. Whatever we call subsidy, you subsidize with what you have.

    “The moment you are borrowing money to put into something that you shouldn’t put it into, it is no more subsidy. You are being lavish. You are being irresponsible.

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    “So what we used to call subsidy in the past was not subsidy because Nigeria had no money to subsidize. You subsidize because it’s believed that you have that money and you are helping a situation. We are not subsidizing.

    “We are only being lavish and we are telling ourselves lies, being insincere with it. And a lot of people, very few of them who had that opportunity, directly or indirectly, are making money from it. Now the reality is on us.

    “It’s unfortunate. All of us are feeling it. But I think it’s earlier now.

    “It’s better now than never. Because it was going to really fall apart if we didn’t face it the way we are facing it. If we had faced it four or five years ago, it wouldn’t be this bad now.

    “We would have been picking up our pieces by now. So whether we like it or not, by the grace of God, we will pick up our pieces. It won’t get too bad for us, by the grace of God”.

    In his farewell remarks, the outgoing APBN President, Manason Garkuwa Rubainu, urged professionals from all fields to stand firm against unethical practices, stressing that working for the benefit of the country is in the interest of every Nigerian.

    He highlighted the pivotal role professionals play in shaping policies and ensuring accountability, saying, “When professionals support bad practices, they weaken society.”

    Rubainu also called for ethical leadership across all professions, urging professionals to uphold high standards and mentor the next generation.

    He emphasized the need for collaboration in addressing challenges and ensuring that Nigeria achieves good governance.

  • Fuel subsidy removal and real estate

    Fuel subsidy removal and real estate

    Sir: It is sad and disheartening that Nigeria, Africa’s largest oil producer does not have operational or functional oil refineries, hence its resort to importation of fuel to meet the about 70 million litres daily consumption of fuel by about 200 million Nigerians. Government subsidizes by paying the difference between the pump price of fuel -premium motor spirits- at the petrol station and the actual cost of importation of the product.

    Fuel subsidy policy which became institutionalized following the promulgation of the Price Control Act in 1977 has over the years become a contentious and highly controversial issue. It is not in contention however that fuel subsidy has become a huge financial burden in the light of the nation’s economic reality, with substantial portion of the national income committed to funding the subsidy scheme on annual basis, causing essential sectors and services such as education, health, defence and critical infrastructure to suffer inadequate funding. Subsidies have long been a tremendous drain on the resources of the country, a conduit pipe used to steal money.

    The Buhari administration resorted to borrowing to finance infrastructure and other services, leaving behind about N77 trillion ($167bn) debt to local and foreign creditors at the expiration of his tenure. Already, 96 percent of the government’s revenue is being used to service debt and there are fears the government’s cash crunch could worsen if subsidy payments continue.

    President Bola Ahmed Tinubu announced an end to the highly controversial subsidy regime on assumption of office. Expectedly, this has led to increase in the pump price, with the price of fuel at between N650 and N900 per litre in Lagos. The price differs from state to state off course. Prices of goods and services have also gone up.

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    Critical sectors of the economy, including the real estate sector are feeling the heat. High cost of fuel has led to increase in cost of production, including transport fare, causing building materials prices to shoot up, simply because producers of these materials rely largely on petroleum for energy; don’t forget that electricity supply is unstable. Cost of taking the materials to sites has also increased. These have consequences on rent, affordability, housing delivery and house gap. Industry practitioners are dealing with defaults in payment and renewal of rents, for commercial and residential accommodation.

    Going forward; though there are huge benefits in subsidy removal to the economy, if sincerely implemented, the long-term benefits are huge, and worth the sacrifices of the moment. In the interim however, government should introduce comprehensive incentives and palliatives to cushion the effects of deregulation on the poor and average Nigerians.

    It is extremely important and urgent for the government to address housing and infrastructure development. Federal government should put in place policies and institutional framework cutting across all levels of government – local, state and federal – for social housing. Government should in addition strengthen the mortgage system and make it drive housing provision.

    Housing could drive and sustain our economy, but right things must be done.

    ESV Opebiyi Beatrice Abosede,Lagos.

  • Oyegun explains why subsidy removal is necessary

    Oyegun explains why subsidy removal is necessary

    National Chairman of the All Progressives Congress (APC) Chief John Odigie-Oyegun said Friday that the government had to do away with the subsidy regime because it was evident that Nigerians were not benefiting from it.

    Addressing a news conference at the party national secretariat, Oyegun said a few Nigerians who had manipulated the sector over the years have continued to enrich themselves from proceeds of the subsidy regime in the country, adding that it was high time the government free the economy and allow the forces of demand and supply take place.

    While appealing for understanding of organised labour and their civil society allies as well as the Nigerian public over the increase, the APC Chairman admitted that the price increase will force increased hardship on the Nigerian people, but was quick to add that the “economy is being freed in a way that the ordinary Nigerian will become the major beneficiary”.

    Oyegun said: “I invited you because of the fundamental announcement that was made within the last 24 hours because I wanted to join my voice with that of the Minister to appeal to the Nigerian public, to our unions and other civil society groups for understanding of the situation that has led to the partial deregulation of fuel prices.

    “Yes, Nigerians have a right to subsidy on that one natural resource that the good Lord has endowed us with. But there is no question at all that over time. The subsidy regime has become so intensely manipulated, so abused that it really was no longer operating in the interest of the Nigerian public.

    “I think that it has become very clear that the kind of queues that has become endemic over several regimes in this nation is a clear indication that something has gone seriously wrong with the subsidy regime. Those who were privileged were exploiting it to amass more wealth.

    “Meanwhile, the person for who it is basically meant has to bear the cost in higher transport fare. Each time these queues develop, of course the ordinary Nigerian bears the cost while the importers and manipulators of the system are the ones that make all the money.

    “I don’t know how many people have drivers. So, you are I fact having the middle class of this nation queuing at petrol stations for long hours to buy fuel at over N200 per liter. A situation like that is revibrating to the detriment of the same people that the government has sworn to protect and to promote.

    “What the new regime is therefore doing is to ensure availability and having fuel at all so as to prevent indecent queues at petrol stations which has become something that is no longer desirable especially considering the fact that when you eventually get the fuel, it is already overpriced.

    “From our point of view as a party, if has become necessary to fully and in order to recover from the economic situation which we have been plunged to totally free the economy and let the normal laws of demand and supply operate.

    “Of course, with government standing bye to protect the long suffering Nigerian who is at the margin. If is unfortunate, it is painful what has happened, it will increase cost in all directions. But in the medium term, in three months at best, I foresee that the prices will come crashing down when there is availability.

    “NNPC will continue to be in the field anyway either through the refineries whenever our pipelines are allowed to function or through importation and so will continue to be a player in the fuel supply market. Prices are bound to come down.

    “A typical example is what happened when mobile phones were introduced. I remember that I bought a SIM card for over N30, 000, but today, it is virtually free. If we free the fuel market, that same thing will happen which was as a result of competition is likely to happen.

    “In any case, the current budget did not provide for subsidy and so, if the region of subsidy is to be reintroduced, it can only divert resources from the crying needs of other sectors, including the programme to help the Nigerians living at the margin.

    “So, the appeal which is a very sincere appeal to the Nigerian people; yes there is a lot of hardship, yes increased pump price will also increase that hardship. But the economy is being freed in a way that the ordinary Nigerian will become the major beneficiary and we are talking of a matter of months from removing this one last bottleneck that has held the Nigerian economy down.

    “So, it is an appeal and we should watch what happen in the next few months as far as the fuel issue is concerned because I am sure it will come crashing down. In any case, it will free resources eventually that will be used to create good jobs which have been promised and improve the lot of the Nigerians at the margin.

    “That is the message the party wants to convey. The economy is in bad shape as a result of which our people are going through hard times. But unless we correct some of these chocked points within the economy, we will not revive as quickly as if should be”.

    Oyegun argued that the issue in the nation’ soil sector is more complicated than what Nigerians are seeing! saying “the industry has been bedeviled for a long time. Ask yourself, why we have not built new refineries. Why has the private sector not been able to build new refineries? Being a crude oil producing country,why have we not benefited from it.

    “Once you have government interference and controlling prices, a man do his arithmetic and come to the conclusion that if he built a refinery, he may not be able to sell at control price and so, he hands off.
    “What is happening now is going to free the sector and attract new investment into the sector and create jobs because people now see that government interference is off and there is profit in investing there. At the end of the day, the nation is going to benefit from the inflow into the industry”

    He assured that the government will do something to cushion the effect of the price increase, saying “I think that is something that will very much be under consideration. I suppose this had to be done urgently because the depredation at the fuel stations was really too much and this had to be done immediately, the issue of cushioning will come and I am sure the ministry will be looking at that”.

  • Oyegun, labour differ on fuel subsidy removal

    Oyegun, labour differ on fuel subsidy removal

    ALL Progressives Congress (APC) National Chairman Chief John Odigie-Oyegun said yesterday that gradual removal of subsidy on petroleum is necessary following emerging realities.

    But the Nigeria Labour Congress (NLC) differed, insisting that it was against the interest of the Nigerians to remove subsidy on petroleum products.

    Rather than removing subsidy, NLC said the government should consider reducing the prices of petroleum products.Oyegun, who spoke when he received a delegation of the APC National Coalition for Peace and Mobilisation (NACOPEAM) at the party’s national secretariat in Abuja, said a situation where government spent almost a trillion naira yearly on the subsidy regime was unacceptable and could no longer be sustained.

    The APC chairman said the Buhari government inherited an “infected system of subsidy” run by corrupt cartels, adding that “in one way or the other, subsidy must go”.

    He stressed that oil cartels and their cronies, who were resistant to change have continued to blackmail and sabotage government’s efforts on the issue of subsidy, resulting in the lingering nationwide fuel scarcity.

    Describing the fuel scarcity as a “national disgrace”, the APC chairman said there was need to restructure the country’s oil and gas sector, which, he said, had been marred by corruption and inefficiencies.

    He dismissed reports of an imminent increase in pump price of petroleum products, adding that the directive by President Muhammadu Buhari to the Petroleum Products Pricing Regulatory Agency (PPPRA) to adjust its pricing template to reflect competitive and market-driven components might not necessarily result in increase in the pump price of petrol.

    He said the presidential directive would rather result in a more efficient and realistic pricing system for petroleum products and also result in constant availability of fuel.

    NACOPEAM National President Comrade Ahmed Saleh said the fuel scarcity impacts negatively on the party, adding that “the unbearable fuel queues along filling stations were avoidable. The situation is impacting negatively on the integrity of the party and this noble administration of positive change”.

    Saleh called for the “total overhauling” of heads of Federal Government commissions, parastatals and agencies, saying “during electioneering campaign, the APC went around the length and breadth of Nigeria informing the citizen on the ills and mal-administration of the past regime”.

    “However, there is need for total overhauling and new trusted heads of commissions, paratatals and agencies to be appointed for effective, efficient and result-oriented service to the Nigerian citizens.”

    However, rising from an emergency meeting of its Central Working Committee, the NLC said its position on the removal of fuel subsidy had not changed, stressing that Nigerians were not responsible for the challenges the nation was passing through.

    Addressing reporters at the end of the meeting, NLC President Comrade Ayuba Wabba said the government should rather concentrate on making local refineries work rather than importing refined products from outside the country.

    He added that the congress would not accept any situation where the Nigerian worker would be made to pay for the decay in the system, pointing out that the removal of subsidy on petroleum products was not the solution to the challenges facing the country.

  • Fed Govt undecided over fuel subsidy removal, says Perm Sec

    Fed Govt undecided over fuel subsidy removal, says Perm Sec

    The Federal Government has not taken any decision on whether to remove or leave fuel subsidy as it is, rather, it is on the front burners of debate by officials of the government, the Permanent Secretary, Federal Ministry of Finance, Mrs. Ana Daniel-Nwaobia, has said.

    She said a lot of factors would be taken into consideration before such a decision could be taken.  “There are various considerations that will come into play before a decision would be reached. You have to take into consideration various issues before you remove subsidy. It’s a political issue, and you know we have a new government that is studying it, with time, we will know the position of government on that,” she said during the World Bank/International Monetary Fund (IMF) meeting in Peru.

    She said it is important to know that Nigeria is not the only country experiencing the effects of the financial crunch, saying it is a global phenomenon. “We noted that in our discussions with other ministers of finance, that everybody is struggling, and everyone is coming up with solutions and strategies on how to weather the storm for now,” she explained, adding that there’s a consensus that one way of addressing this, “is by mobilising domestic resources.”

    Reforming the tax system which she said the Federal Government has started, is the right thing to do, stating that the engagement of McKinsey, (a firm of tax consultants), working with the Federal Inland Revenue Service (FIRS), would contribute to shoring up tax revenues.

    She said: “In our engagement with the World Bank also, we sought assistance, so that they will work with us to see how we can improve on what is already on the ground.

    “We are also looking at other areas of revenue, because our main concern is about how we can shore up our sources of revenue. We are going to engage also with the World Bank on how to give capacity and support to our Customs, because Customs is one of the key revenue earners in the country, so that we will be able to build their capacity and see how they can add to our revenue base.”

    Mrs. Daniel-Nwaobia, said the issues of environment and the effect of climate change were also discussed by the Nigerian delegation at the meetings, because in her words: “we suffer the effect of climate change in terms of drought and flooding.”  She said the Middle Belt region has suffered from flooding in the course of the year.

    “Recently there was flood in the Middle Belt and the Northwestern part of the country in Kebbi and Sokoto states that washed away rice farms. The effects of climate change are very key and has a damning effect generally on the economy,” she warned.

    She said the issue was thoroughly discussed in one of the meetings, as well as to how  resources could be mobilised to tackle the issues surrounding climate change preparatory to the summit on climate change that is scheduled for Paris, France, later in the year. She said the Nigerian team had meeting with other funding agencies, including the International Finance Corporation (IFC) on how to fund some projects in the country.

     

     

     

     

    “We told them about some of the reforms we are undertaking, especially in the area of building infrastructure, because one of the gaps we have noticed is the gap in infrastructure deficit,” the permanent secretary said.

    Mrs. Daniel-Nwaobia said government is already thinking of how to set up an Infrastructure Fund, and looking for how to fund it.  “So we have discussed with the IFC and other agencies in the understanding that when we are able to identify some of these infrastructure projects, they will participate in the funding of some of these projects. It was thoroughly discussed in one of the meetings to the effect that “we can mobilise resources to tackle the problem,” she stated.

     

  • Govt to save $2.5b from fuel subsidy removal

    Govt to save $2.5b from fuel subsidy removal

    The Federal Government is expected to save $2.5 billion or four per cent of this year’s budget by removing oil subsidy, a report by Renaissance Capital (RenCap), a global investment and research firm has said.

    Sub-Saharan Africa Economist at RenCap, Yvonne Mhango said given the downside risk to revenue and the near-depletion of the excess crude account, the government may have little option but to remove fuel subsidy.

    She said previously, the probability of the oil price falling below $80/barrel was low. She said: “Today, we are adapting to the fact that this may be the new normal, following OPEC’s (Organisation of Petroleum Exporting Countries) (which represents 40 per cent of the world’s production) decision to maintain current production levels in response to lower oil prices. Lower oil prices may result in a further slowdown in foreign exchange inflows, challenging the Central Bank of Nigeria (CBN’s) ability to defend the naira.

    “This means savings of $2.5 billion, or four per cent of 2014 budget consolidated government budget. We think the current low public debt levels of 11 to 12 per cent of Gross Domestic Product (GDP) and revenue growth challenges imply government’s borrowing may increase in 2015, leading to an increase in yields, after being depressed in 2014.”

    Mhango said next year may turn out to be a tougher year for the consumer, stressing that two of the four variables that explain consumer confidence in its regression model have been adversely impacted by devaluation of the naira and interest rate hike.

    The economist and author, the Fastest  Billions, said interest rates have been hiked and contractionary fiscal policy implies the prospects of wage increases for civil servants, in the short term, have dimmed.

    “Of the four variables we use to explain the consumer confidence index in our regression model (including oil output and real Gross Domestic Product growth), we find the index to be most sensitive to interest rate movements. Further upside risk to interest rates and the potential removal of the fuel subsidy imply that 2015 has the potential of being a tougher year for the consumer than 2012,” she said in an emailed report.

    She expects the cement industry to see a softening in demand as capital expenditure slows on the back of restrictive fiscal policy and a higher interest rate environment. “We see debt benefiting from higher rates, at the expense of equities,” she said.

    She said while a weaker naira would possibly slow demand for imports and the lower oil price reduce the cost of importing refined oil by 20 per cent, such would be sufficient to keep the current account positive.

    She said this implies that foreign exchange reserves may have to be drawn down to finance Nigeria’s balance of payments (BoP).

    Explaining further, the RenCap chief said a fall in import demand should lower trade credits, and by implication, financial outflows which mean a capital and financial account surplus may result. This may, however, be undermined by portfolio investment outflows.

    “If the central bank therefore finds itself in the position where it is drawing on FX reserves to cover the BoP’s financing gap (as it did in 2009 and 2010, and needs to defend the naira in a low oil price environment, there is a risk that it may be forced to loosen its hold on the naira, implying further currency weakness (an interbank rate of N185 to 195/$1) in the short term is plausible,” she said.

    The Monetary Policy Committee (MPC) had at its last meeting hiked the policy rate by one percentage point to 13 per cent, the highest it has been since the global financial crisis.  The short-term risks to the naira, she said, suggest that further tightening may be necessary.