The National Economic Council, NEC, on Thursday, suspended the planned removal of subsidy on petroleum products by the end of President Muhammadu Buhari’s administration.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed disclosed this while briefing State House correspondents at the end of the NEC meeting presided over by Vice President Yemi Osinbajo at the Presidential Villa, Abuja.
She explained that the removal of the subsidy will likely take effect in June because the Petroleum Industry Act, PIA and the 2023 budget provided subsidy till June, hence any delay may require the amendment of the PIA and the budget provision.
Ahmed explained that although the removal of fuel subsidy imminent, the council decided that the timing for the removal of subsidy should not be now.
She explained that the council decided that the federal government should continue with all of the preparatory works that needs to be done and that this preparation work has to be done in consultation with the states and other key stakeholders, including representatives of the incoming administration.
According to him, “The National Economic Council, discussed the issue of post subsidy removal. The Council agreed that the timing for the removal of subsidy should not be now but that we should continue with all of the preparation works that needs to be done and that this preparation work has to be done in consultation with the states and other key stakeholders, including representatives of the incoming administration.
“The council agreed that the fuel subsidy must be removed earlier rather than later because it is not sustainable. We cannot afford it anymore. 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 humans.
“So, this will require looking at alternatives to the post subsidy that needs to be planned for and subsequently put in place but also what needs to be done to support the people that are most affected as a result of the removal.
“So, we will be working together with representatives of the state who will have a plan that will start working on putting the building blocks towards the eventual removal of the first subsidy. And finally, remind the forum that the budget for 2023 has provision for for subsidy only up to June 2023 and also the petroleum industry Act has a provision that requires that all petroleum products must be deregulated 18 months after the effective date of the PMs removal and that that period is also up to June 2020.
“I said that we agreed to form an expanded committee that will be looking at the process for the removal including determining the exact time and also the measures that need to be taken to provide support to the poor and the vulnerable and then also the alternatives that will be put in place, including ensuring that there is sufficient supply of petroleum products in the country.”
Speaking further, she said that the issues bordering on the deadline for the removal of fuel subsidy should be the burden of the next administration as the laws states that the removal of fuel subsidy should happen in June.
She said, “What I said is that it is not going to be removed now. Which means it will not be removed before the transition is completed. That’s what it means. But then we have two laws that have in advertently made the provision that we should exit by June.
“So the committee’s work, which will include the representatives of the incoming administration determining if the removal can be done by June then they will plan. The work plan will be designed to exit as at June, but if the determination is that the period is to be extended, it will mean that we as a country will have to revisit the Appropriation Act for example, because the 2023 budget only made provision up to June.
“So, if we’re extending beyond June it means we’ll have to revisit the Appropriation Act and do a supplementary or amend the bill and also the Petroleum Industry Act (PIA).
“So, these are the reasons why we had to do this consultation. We would like to get inputs from the governors. They’re going to provide us their representatives to work together with us to have a defined process that will take us towards the removal.
“But one thing that is clear is everybody agrees that the subsidy should be removed very quickly because the cost is only not efficient but is also not sustainable, and that when the time comes for removal, the removal will be done once and for all.” she said
Fielding question on the specific measures to be be put in place to mitigate the effect of subsidy removal and how the decision will affect the law on ground as the PIA has given a definite time for the removal of subsidy, the 2023 budget provides for subsidy until June 2023, what happens after June 2023, she said:
“I said that we agreed to form an expanded committee that will be looking at the process for the removal including determining the exact time and also the measures that need to be taken to provide support to the poor and the vulnerable and then also the alternatives that will be put in place, including ensuring that there is sufficient supply of petroleum products in the country.
“So this is a decision that has been taken to expand the committee that is currently working with representatives of the states and it is also will have to be engaging with labour, will have to be engaging with petroleum marketers.
“The immediate committee is just comprising the ministry finance, the NNPC, the downstream upstream regulator, as well as the Ministry of Finance, budget, a national plan. So there’ll be an expanded committee so that it is not just a few people’s thoughts that will guide the process but that there is sufficient consultation taking inputs from key stakeholders into the measures that need to be taken.”
Responding to question on the $800m World Bank loan to help cushion the effect of fuel subsidy removal, the Minister said, “On the issue of the $800 million so far, what we have is that $800 million that has been secured.
“We’re hoping that the removal of fuel subsidy, with the savings that removal will cause that the Federation which is federal government and state themselves will be able to provide further measures from this increased revenue that will accrue to the Federation account.
“Again, that is a matter of discussion. The states may want to have their own design programmes the federal government you want to do something different. So we have to discuss how to utilise that savings and that’s one thing that was also presented today at the National Economic Council.”