…Says boosting locally refined products will unify exchange rate
By Uthman Salami
The reasons behind Federal Government’s decision to reject the proposed removal of fuel subsidy, which had caused many public uproar amongst Nigerian, earlier this year has been explained by the President, Muhammadu Buhari.
The President explained that, he decided to shun the advice given to him by the World Bank and leading economists in the world because he considered the idea untenable to Nigerians, noting that boosting locally refined products would unify the shocks resulting from exchange rate.
The President, Muhammdu Buhari rendered the reasons behind his decisions during an interview with Bloomberg.
Recall that The Executive Board of the IMF made the call at the conclusion of the Article IV consultation with Nigeria, which reflects the organisation’s perspective.
The Fund’s statement also said, through the report that, “The Directors also urged the removal of untargeted fuel subsidies, with compensatory measures for the poor and transparent use of saved resources.”
IMF urged the CBN to unify the exchange rate by abandoning the official exchange rate in favour of the parallel market rate.
While defending his decision not to heed the calls by the International Monetary Fund (IMF), World Bank and other leading economists, the president laid credence to the existence of the policy in the developed countries, who despite their clamour for subsidy removal, are still subsidising fuel for their citizens.
He said the western allies were now learning the hard way what looked good on paper but with human consequences if implemented.
While being quizzed on the rationale behind failing to heed the advice to remove the fuel subsidy and unify the exchange rate after many years, Buhari said, “Most western countries are today implementing fuel subsidies. Why would we remove ours now? What is good for the goose is good for the gander”
“What our western allies are learning the hard way is what looks good on paper and the human consequences are two different things. My government set in motion plans to remove the subsidy late last year.
“After further consultation with stakeholders, and as events unfolded this year, such a move became increasingly untenable. Boosting internal production for refined products shall also help. Capacity is due to step up markedly later this year and next, as private players and modular refineries (Dangote Refinery, BUA Group Refinery, Waltersmith Refinery) come on board.
“The exchange rate is still susceptible to external shocks that can suddenly and severely affect Nigerian citizens. As we step up domestic production – both in fuel (enabled by PIA) and food (agricultural policies) – the inflationary threat shall diminish, and we can move toward unification.”
This planned was met with chronic resistance from the public especially the Nigerian Labour Congress (NLC) who had announced a national protest on February 1, 2022, against Federal Government.
The Union said that before the major protest, there would be rallies in 26 states of the federation on January 27th aimed at the same objective.
This, in a way coupled with other criticisms, prompted the Federal Government, through the Minister of Finance, Budget and National Planning, Zainab Ahmed to suspend the planned petrol subsidy removal.
The Federal Fovernment has postponed the planned petrol subsidy removal till further notice due to “high inflation and economic hardship.”
The Finance Minister said the Government had to reconsider its decision after the 2022 budget was passed.
Ahmed said petrol subsidy was provided for in the 2022 budget to run from January till June.
She, however, said that after consultations with stakeholders — in view of the high inflation and economic hardship — additional provisions would be made beyond the initial period.
According to her, it has become clear that the timing for the removal of petrol subsidy will be problematic as the country still experiences heightened inflation.
In April, following the federal government N3 trillion subsidy payment, the National Assembly approved the revised budget of N17,319,704,091,019 trillion for the 2022 fiscal year.
The revised sum of N17.3 trillion, which is in contrast with the 2022 budget of N17.13 trillion passed last year, represents a N193 billion increase.
While the Senate approved N3.55 trillion for petrol subsidy, the House of Representatives okayed N4 trillion.