The Abuja Chamber of Commerce and Industry (ACCI) has reacted to the removal of fuel subsidy and the negative effect it would pose on the Small and Medium Enterprises (SME) business community.
At the presidential inauguration on Monday, 29th May 2023, President Bola Ahmed Tinubu in his inaugural speech announced the total removal of the popular fuel subsidy, which immediately resulted in high prices and long queues nationwide.
The National Petroleum Company (NNPC) Limited on Wednesday morning, officially increased fuel pump prices to more than N500 in different parts of the country thereby causing immediate increase in transportation fares across the country.
Over the years, policies aimed at removing fuel subsidy have been met with stiff opposition and has sometimes led to widespread public protests. For instance, in the year 2021, the IMF offered some recommendations that Nigeria needs to remove fuel subsidies for the country to maintain both fiscal and monetary balances following the aftermath effect of the global pandemic.
The main argument has been that fuel subsidy had been used as a means of siphoning funds and benefits only a select few. The government also argued that revenue generated after the subsidy, if removed, would be used to provide infrastructural facilities that would benefit all.
However, the removal of subsidy could have a deleterious effect on the entire nation, if not properly managed. An increase in the cost of petroleum motor spirit (PMS), is set to bring about inflation and ultimately spiral into every sector of the economy, worst hit will be the SME sector. Cost of production and overhead expenses will increase, consequently, the cost of goods and services might skyrocket too.
ACCI as a voice of the business community and a platform for policymakers and the Organised Private Sector has projected the removal of fuel subsidies to negatively impact SME businesses and as such seeks a cushioning effect from the government.
According to the International Labour Organisation, SMEs make up about 96 per cent of all businesses in Nigeria and are responsible for contributing 48 per cent to the country’s GDP. Furthermore, these businesses provide 84 per cent of the country’s employment opportunities.
Due to the country’s dire economic circumstances, at least 1.9 million SMEs have been lost since 2017, according to the report, yet business closures persist at an alarming rate as a result of many challenges facing the sector.
The President of ACCI, Dr Al-Mujtaba Abubakar speaking on behalf of the Executive Council, and members of ACCI stated that though the removal of fuel subsidies may seem as the right step in the right direction, as it deregulates the oil sector and allow for competition in the industry but the government should provide SMEs with business palliatives to ease the pressure of the subsidy.
“If this is properly implemented, it will provide cushion for the effect this immediate removal will have on small business owners.”
The ACCI will be available to work with the Government in marshalling out support the SME would need to alleviate the pressure the subsidy removal may have on their businesses.
Dr Al-Mujtaba Abubakar (MFR, FCA)