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Subsidy: Nigerians To Spend N6.7tn On Fuel In 2022, Petrol To Sell For N340 From February

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Nigerians will spend about N6.732tn on the purchase of Premium Motor Spirit, popularly called petrol, within a period of 12 months once the Federal Government stops subsidising the commodity from February next year, investigations have revealed.

This came to the fore on Wednesday as the Nigeria Labour Congress described the government’s plan as a “penny wise pound foolish” gamble.

The Senate and economic experts also faulted the Federal Government’s plan to pay N5,000 each to 40 million Nigerians to cushion the effect of fuel subsidy removal.

The Group Managing Director of the Nigerian National Petroleum Company Limited, Mele Kyari, had on Tuesday announced at a World Bank event in Abuja that petrol would sell for between N320 and N340 per litre from February 2022.

The current pump price of petrol at filling stations is between N162 and N165/litre, although the product is mostly sold at the upper N165/litre rate due to recent challenges in the downstream oil sector.

The N165/litre price is basically because the product is being subsidised by the Federal Government through the NNPC.

Going by the latest revelation of the NNPC boss that subsidy on petrol would end in February and the price jerked up to N340/litre, findings showed that Nigerians would spend about N18.7bn daily for the over 55 million litres of petrol consumed each day across the country.

Users of petrol would spend about N561bn for the average of 30 days in a month, while in the 12-month period, consumers would pay about N6.732tn.

In its most recently published monthly operational and financial report, which was for April 2021, the NNPC put the daily petrol consumption in Nigeria at 55.79 million litres.

“To ensure continuous increased PMS supply and effective distribution across the country, a total of 1.67 billion litres of PMS translating to 55.79 million litres per day were supplied for the month in the downstream sector,” the oil firm stated.

Working with 55 million litres daily consumption figure and the current price of N165/litre, consumers of petrol are estimated to be currently paying N9.075bn daily and about N277.25bn monthly.

By increasing the cost of petrol to N340/litre and matching it against the 55 million daily consumption rate, Nigerians would be paying N18.7bn daily for PMS, while their monthly spending would be N561bn.

This means that the annual fuel consumption bill of Nigerians will be in the region of N6.732tn.

From the foregoing, it implies that Nigerians would pay an additional amount of about N283.75bn every month on petrol when the new N340/litre price for PMS comes into effect.

Therefore within a period of 12 months, Nigerians would spend about N3.4tn extra on the current N3.3tn for the purchase of petrol should the Federal Government halt the subsidy regime.

But the government promised on Tuesday that it had plans to cushion the economic effect of the planned subsidy removal, as it announced plans to replace fuel subsidy with a N5,000 monthly transportation subsidy to the poor.

According to her, a monthly transport subsidy in the form of a cash transfer of N5,000 will be given to between 30 and 40 million Nigerians.

The NNPC, being the sole importer of petrol into Nigeria for the past four years, has been subsidising the commodity and has been incurring humongous costs as subsidies.

This development had severely depleted the oil firm’s remittances to the Federation Accounts Allocation Committee, hence, reducing the monthly allocations to the three tiers of government consistently.

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Nigeria’s Stability More Important Than Our Pockets — Shettima Tells Senators-Elect

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Nigeria’s Vice-President, Kashim Shettima, has charged senators-elect to “vote wisely” when the upper legislative chamber is inaugurated next week.

The senate will elect its presiding officers for the 10th assembly on Tuesday.

Speaking during the ninth senate’s valedictory session on Saturday, Shettima told the lawmakers that the stability of the country is greater than that of their pockets.

There have been allegations that some senate president hopefuls are using money to woo senators-elect to vote for them.

Although the All Progressives Congress (APC) has nominated Godswill Akpabio, a former minister of Niger Delta affairs, for the position of senate president, Abdulaziz Yari, a former governor of Zamfara, and Orji Uzor Kalu, chief whip, have insisted on vying for the position.

The vice-president said the country’s interest should inform who they elect as senate president and deputy.

“To my incoming colleagues, I will leave you with a parable, ‘the stability of this nation is superior to the stability of our pockets’. On Tuesday, let us vote wisely, let us vote for the Nigerian nation,” he said.

The number two citizen described his colleagues as “friends who have become an integral part of my history”.

“We have served shoulder to shoulder in the face of adversity and worked relentlessly for the betterment of our nation,” he said.

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BREAKING: DSS Confirms Godwin Emefiele’s Arrest [VIDEO]

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The Department of State Services (DSS) has confirmed the arrest of suspended Central Bank of Nigeria (CBN) governor, Godwin Emefiele.

It was earlier reported the arrest of Emefiele by the DSS, shortly after he was suspended by President Bola Tinubu.

But on Saturday, the Service, on its Twitter handle said Emefiele was not in its custody.

Despite the denial by the DSS, report has it that the former CBN chief was in the custody of the secret police.

But confirming the report on Saturday evening, DSS spokesman, Peter Afunanya, posted: “The Department of State Services (DSS) hereby confirms that Mr Godwin Emefiele, the suspended Governor of the Central Bank of Nigeria (CBN) is now in its custody for some investigative reasons.”

 

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Talking Frankly On Removal Of Fuel Subsidy By Babajide Fadoju 

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Now that subsidy is gone, what is the plan?

Subsidies play a significant role in shaping economic policies in many countries, including Nigeria.

Subsidies are government incentives that aim to support specific industries or sectors by reducing the cost of goods or services.

However, the effect of subsidy removal on the Nigerian economy has been a subject of much debate and analysis.

Subsidies have long been used by the Nigerian government to support various sectors primarily the energy sector.

These subsidies are intended to stimulate economic growth, encourage investment, and alleviate the burden of high costs on consumers.

For instance, fuel subsidies have been implemented to ensure affordable prices for petroleum products, as Nigeria heavily relies on oil for its revenue.

Due to several imports, the subsidy on petrol has to be removed. For one the federal government cannot afford the subsidy payment anymore.

By removing subsidies, the government can redirect its spending towards more productive sectors.

The funds that were previously allocated to subsidies can be channelled into infrastructure development, healthcare, education, and other critical areas that can foster long-term economic growth.

The removal of subsidy is good for the industry; growth will be engendered as several players can now play competitively, efficiency will become the cornerstone to build on and this will aid product delivery to the end users.

The removal of subsidies can promote economic efficiency by allowing market forces to determine prices and allocate resources more effectively.

When subsidies are in place, they can distort market signals, leading to inefficiencies and suboptimal resource allocation. By removing subsidies, the government can create an environment that encourages competition and innovation, driving economic growth in the long run.

That is just one way to look at it, according to economic analysts, the removal of subsidies will trigger a temporary spike in inflation as the prices of essential commodities rise. However, over time, the market will adjust to the new price equilibrium, and inflationary pressures may stabilize.

One of the primary concerns surrounding subsidy removal is its impact on low-income households. These households often heavily rely on subsidized goods for their daily needs.

When subsidies are removed, the cost of living may increase, posing challenges for vulnerable segments of society.

To counter this, the government is prepared to review several areas of the fiscal economy. The government is prepared to review the minimum wage and provide palliatives for the most vulnerable.

More importantly, the money recouped from subsidy will be reallocated into infrastructure development and social programs, fostering sustainable economic growth.

It might be hard at first, but we will cross this rubicon and the country will be better for it.

Frequently Asked Questions (FAQs)

1. When was fuel subsidy removed in Nigeria?

Contrary to popular opinion, the subsidy regime was ended by the assent to the Petroluem Industry Act by the then president, Muhammadu Buhari in February of 2022. However, the nation was not ready and the budgetary allocation continued into May of 2023 – the end of the Buhari administration.

2. How does subsidy removal impact inflation?

Subsidy removal can lead to short-term inflationary pressures as the prices of subsidized goods or services increase. However, over time, the market can adjust to the new price equilibrium, and inflation may stabilize.

3. Are there alternative measures to subsidy removal?

Yes, there are alternative measures that can be considered before resorting to subsidy removal. These include subsidy reforms, targeting subsidies to specific populations, improving subsidy delivery mechanisms, and implementing fiscal consolidation measures.

4. What are the potential social implications of subsidy removal?

Subsidy removal can have social implications, particularly for low-income households. The increased cost of living may pose challenges for vulnerable segments of society. However, by redirecting resources, the government can implement targeted social welfare programs to mitigate the adverse effects.

6. What are the long-term benefits of subsidy removal?

The long-term benefits of subsidy removal include improved fiscal sustainability, increased government revenue, reduced corruption opportunities, economic efficiency, and the reallocation of resources to critical sectors.

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