By Yemi Olakitan
Minister of Finance, Budget, and National Planning, Ms. Zainab Ahmed, has said the Federal Government will abolish the contentious petrol subsidy before President Muhammadu Buhari’s term ends on May 29, 2023.
Ahmed blamed the next national population census and the 2023 general election for the delay in removing the subsidy, as required by the Petroleum Industry Act (PIA) 2021.
The minister reportedly remarked while paying a courtesy visit to the Voice of Nigeria (VON) office in Abuja.
However, the Federal Government revealed yesterday that no decision had been made regarding how to lessen the impact of the projected elimination of fuel subsidies on the populace.
In related news, the Ghana National Petroleum Authority (NPA) withdrew fuel subsidies throughout the nation, according to news reports from yesterday.
The Nigerian government recently approved Nigeria’s Agenda 2050, which aims to transform the nation into a high income economy, and postponed the 2023 population and housing census, which was originally slated for the end of this month, until May.
Value Added Tax (VAT) should be raised from the existing 7.5% to 10%, Ahmed recommended the next administration.
Removing subsidies, according to her, required the government to make a difficult political and economic decision.
However the minister claimed that practically everyone now recognised that subsidies did not benefit the intended population and that their high cost increased the deficit of the government.
She went on to say that Nigeria spends over N250 billion each month on subsidies and that the cost of a litre of petrol ranged from N350 to N400.
The downstream sector is completely deregulated under the PIA, which Buhari signed into law on August 16, 2021. This means that subsidies will no longer exist and the sector would operate on a free market system.
However, the federal government ignored that part of the PIA in January 2022 and delayed the termination of subsidies until the end of June 2023.
The administration noted the suffering that subsidy elimination would cause for the masses of the poor and vulnerable.
The gasoline subsidy is one of those political and economic choices that you don’t want to make, but you’re stuck with it nonetheless, Ahmed stated during the visit to VON.
But we’ve reached a point where nearly everyone is in agreement that this is actually not helping the people it is supposed to help, and the cost has gotten to the point where it’s increasing our deficit.
And as of this now, the Appropriations Act has given us permission to stop providing subsidies by June 2023.
I can at least say that the Appropriations Act made a clause limiting the use of subsidies to the period through June 2023.
Hence, we need to find measures to stop the subsidies so that the market can grow.
Marketers would be able to invest in bringing this gasoline product to market and selling it at current market rates after the subsidy is removed.
Also, it is imported by NNPC alone, and its price is set by the government.
As a result, the subsidy per litre currently varies, sometimes reaching N400.
Just consider what you might accomplish with N250 billion per month, which is the average monthly cost to the country, instead of the subsidy that the government is carrying.
Even at that price, there is an implicit forex subsidy for NNPC.
The minister stated that such funds might be used to expand hospitals and educational facilities, as well as to improve infrastructure and other vital areas that would directly benefit Nigerians.
She said, “Instead of just using it on a consumption item, you can use it to build more hospitals, more schools, offer more social services, and improve infrastructure that will improve the quality of life of the people.
After you put petrol in your automobile, it runs out after a few days and you have to put more in.
We thus do hope that everyone in the nation would work with the government this time to abolish this subsidy in order to prevent us from repeatedly using up scarce resources on a consumer item.
Ahmed suggested that the next administration raise the VAT to 10%, claiming that doing so will encourage the nation’s economic expansion.
She pointed out that the government had utilised the finance legislation to stop leaks, improve the Nigeria Customs Service and the Federal Inland Revenue Service (FIRS), and she added that the government had also automated the two organisations through the process.
“Therefore, tax compliance has increased,” said Ahmed.
In addition, even though our aim was 10%, we were able to raise our VAT rate from 5% to 7.5% as a result.
You know how it is in Nigeria, though; we set our 10% goal for the second year in order to boost revenue.
“VAT was one of the methods used to boost revenue, and we still need to raise it because, at 7.5%, Nigeria has the lowest VAT rate in the entire world—not just in Africa.
When you raise your VAT in Sub-Saharan Africa, where the average VAT rate is 18%, your GDP will increase.
It will continue to expand as a result of the increased revenue and subsequent increase in economic activity.
Therefore, the next administration needs to take it into consideration in order to gradually raise our VAT rate because it is now too low.
The federal administration revealed that no decision had been made regarding how to lessen the impact of the projected elimination of fuel subsidies on the populace.
This information was made public by Clement Agba, Minister of State for Budget and National Planning, yesterday after the Federal Executive Council (FEC) meeting at State House, Abuja, which was presided over by President Muhammadu Buhari.
Agba claimed that despite a team led by Vice President Yemi Osinbajo working for approximately a year, no concrete decisions had been made.
The minister was answering inquiries on the effects of subsidy removal without the appropriate countermeasures to reduce the impact.
He had faith that the committee, which had been collaborating for more than a year on solutions to mitigate the effects of subsidy removal with the National Economic Council (NEC), a group made up of the governors of the 36 states, the Federal Capital Territory (FCT), and relevant ministries, would make decisions that were consistent.
