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Tag: Fuel Subsidy Removal

  • Analysis: Economic and business implications of fuel and FX subsidy removal

    Analysis: Economic and business implications of fuel and FX subsidy removal

    The removal of fuel subsidies and adoption of a more flexible exchange rate system had been significant policy considerations in Nigeria for many years, with the goal of improving efficiency, reducing fiscal pressures, attracting investments, and promoting economic growth.

    The Nigerian government in the past subsidized fuel to cushion the impact of fluctuating global oil prices and maintain social stability.

    Similarly, Foreign Exchange (FX) subsidies were implemented to provide favorable exchange rates for specific sectors or to support the importation of essential goods and services.

    These subsidies were aimed at maintaining price stability and supporting economic activities in key sectors, yet their sustainability and effectiveness remained subjects of debate and criticism.

    Subsidies on fuel were associated with issues such as smuggling, market distortions, corruption, and significant fiscal burdens on the government. Foreign exchange subsidies have also faced challenges due to limited forex reserves and the need for more market-driven exchange rate mechanisms.

    In a bold move, President Bola Tinubu swiftly announced the removal of fuel and FX subsidies after his inauguration on May 29th, attracting both applauds and criticisms, almost in equal measures.

    TheNewsGuru.com (TNG) reports that the removal of these subsidies is set to have far-reaching implications on Nigeria’s economy and business landscape, and highlights the following likely consequences that will shape the future:

    Decrease in Air and Noise Pollution

    Following the recent removal of subsidies on Premium Motor Spirit (PMS), the price per litre of this commodity has surged from N195 to N537. This significant increase in cost has brought about a notable shift in the usage of generators running on PMS.

    As a result, it is anticipated that there will be a decrease in both air and noise pollution, presenting a positive outlook for the environment and public health, particularly in major cities such as Lagos and Abuja where generator reliance is prevalent.

    Decongestion of roads

    With the soaring cost of purchasing a litre of PMS, many individuals have found it financially burdensome to continue using private vehicles for their daily commute.

    As a result, a significant number of workers are now compelled to prioritize cost over convenience and have made the conscious decision to abandon their personal vehicles and join the ranks of public transportation users.

    This shift in behaviour has brought about a tangible reduction in the number of private vehicles on the roads, alleviating the congestion that has long plagued major cities like Lagos and Abuja during peak hours.

    By embracing public transport as a more affordable alternative, commuters are not only able to mitigate the impact of the price hike on their budgets but also contribute to a more efficient and streamlined traffic flow, resulting in shorter travel times and improved road safety.

    Increase in the price of commodities

    The removal of fuel and FX subsidies accompanied by the subsequent increase in fuel prices, has a direct impact on the prices of commodities. The heightened importation and transportation costs, increased production expenses, and currency devaluation all play significant roles in driving inflationary pressures. As producers and suppliers adjust their pricing strategies to account for these added expenses, consumers ultimately bear the brunt of these adjustments through higher prices for goods and services.

    High exchange rate volatility

    Floating the naira may lead to high exchange rate volatility due to various factors such as market forces, speculation, external events, market sentiment, and limited central bank intervention. These factors contribute to frequent fluctuations in the value of the currency against other currencies, causing uncertainty and risks for businesses. Exchange rate volatility can impact import and export costs, investment decisions, and overall economic stability.

    Increase in export competitiveness

    When the currency is allowed to fluctuate based on market forces, it can result in a depreciation of the currency’s value. A weaker currency makes exports more affordable and competitive in foreign markets. This can potentially boost export volumes and revenues, benefiting businesses engaged in international trade. The increased competitiveness can help stimulate economic growth and improve the country’s balance of trade.

    Increase in capital flows and foreign investment

    By adopting a floating exchange rate system, Nigeria will be able to create a more flexible and market-driven exchange rate environment. This increased flexibility can attract foreign investors seeking opportunities.

    The ability to freely convert currencies and potentially benefit from exchange rate fluctuations can make the country more appealing for foreign investment. This influx of capital can contribute to economic growth, job creation, and the development of various sectors, reflecting confidence in the country’s economic prospects and policies.

    Speaking from Paris, France, President Bola Tinubu highlighted the importance of the removal of fuel subsidy and streamlining the exchange rate to attracting Foreign Direct Investment (FDI) to the country.

    Tinubu extended an invitation to prospective investors, urging them to seize the abundance of opportunities that await them in the vibrant Nigerian market and underlined the government’s unyielding commitment to fostering a propitious business environment that caters to the needs and aspirations of both local entrepreneurs and global investors alike.

    Increase in debt servicing

    the devaluation of the naira increases the cost of servicing foreign currency debt, leading to higher repayment burdens, and affecting the financial stability and ability to meet debt obligations.

    Decrease in wealth valuation

    The devaluation of the naira can result in a decrease in wealth valuation, particularly for individuals and entities holding assets dominated in foreign currencies. As a result, individuals and entities may experience a reduction in their net worth and financial standing.

    This decrease in wealth valuation can also have various implications, including potential changes in investment decisions, asset allocation strategies, and overall financial stability.

    In summary, while some challenges may arise, the removal of fuel and FX subsidies is expected to improve fiscal stability and pave the way for a stronger and more resilient economy.

     

  • Fuel Subsidy Removal: Again, FG, NLC set to meet in Abuja

    Fuel Subsidy Removal: Again, FG, NLC set to meet in Abuja

    Following fuel subsidy removal another round of meeting between the Representatives of the Federal Government and the leadership of the Nigeria Labour Congress, NLC have been scheduled for today Monday in Abuja.

    Recall that the NLC had initially threatened to embark on a nationwide strike before the National Inistrial Court NIC jettisoned the idea,

    However, on June 5, NLC announced the suspension of its planned strike after a series of meetings with the federal government.

    The NLC and the Trade Union Congress, TUC, however, made some demands which would cushion the effect of the hike in fuel price and other essential commodities caused by the subsidy removal.

    It is expected that the both parties would harmonize some of the demands in the meeting scheduled for 4pm today.

    According to the Permanent Secretary, Federal Ministry of Labour and Employment, Kachallom Daju, the parties will reconvene at the presidential Villa, Abuja.

  • Subsidy Removal: Oil Marketers Pledge N10 Billion Buses to Boost Mass Transportation

    Subsidy Removal: Oil Marketers Pledge N10 Billion Buses to Boost Mass Transportation

    The Depot and Petroleum Products Marketers Association of Nigeria (DAPMAN) has announced plans to donate Compressed Natural Gas (CNG) compliant buses worth N10 billion.

    Chairperson of DAPMAN, Winifred Akpani, revealed this during a briefing with State House Correspondents after leading a delegation to the State House for a courtesy visit with President Bola Tinubu on Wednesday.

    “We did pledge that we are going to work at providing real mass transit buses that work. The ones that will work on the compressed natural gas (CNG) and diesel interchangeably and hopefully we are going to start with about 50-100 and that is in a very short time,” she said.

    The donation comes against the backdrop of the recent removal of fuel subsidy, and it is intended to provide employment opportunities and support the government’s efforts to improve the country’s transportation infrastructure.

    The DAPMAN Chairperson emphasized: “These are locally produced vehicles, so we are also providing jobs by using local assembly plants. By not importing the buses, we are reducing pressure on our foreign exchange reserves and creating more jobs for Nigerians”.

    She also expressed President Tinubu’s satisfaction with the initiative and optimism that Nigerians would soon recognize the benefits of removing the subsidy on petrol, while urging citizens to support the President’s direction to propel the country forward.

    Confirming the details, Ogun State Governor, Dapo Abiodun, announced that each bus would cost N100 million and accommodate up to 50 passengers.

    Governor Abiodun dispelled notions that petroleum marketers opposed the deregulation of petrol, stating, “This singular step demonstrates their support for this administration’s laudable policy of deregulation.”

    He further called on other members of the organized private sector, such as the Bankers Committee, to emulate DAPMAN’s benevolent gesture and take additional measures to alleviate the impact of subsidy removal on Nigerians.

     

     

  • Subsidy Removal: UNILAG Management Addresses Surge in Campus Transportation Fares

    Subsidy Removal: UNILAG Management Addresses Surge in Campus Transportation Fares

    In response to the outcry from students over a significant increase in campus transportation fares, the University of Lagos (UNILAG) management has issued a directive to regulate the cost of transportation within the campus and urged other vendors to maintain their existing prices until the end of June.

    The surge in transportation fares on campuses across the country came in the wake of the removal of fuel subsidy by the Nigerian Government which informed the recent announcement of an increase in pump prices of petroleum products by the Nigerian National Petroleum Company Limited (NNPCL).

    During his inauguration speech as Nigeria’s 16th President on Monday in Abuja, President Tinubu emphasized that fuel subsidy was not accounted for in the 2023 budget beyond June.

    Tinubu justified the removal of the subsidy, stating that it had disproportionately favoured the wealthy over the poor, adding that his administration would redirect the funds towards investing in public infrastructure, education, healthcare, and job creation.

    The NNPCL subsequently raised the petroleum pump price from N185 to a range between N488 and N557 and among the consequences of the pump price hike is the surge in transportation fares on Nigerian tertiary institution campuses.

    Students across various campuses, including UNILAG, Usmanu Danfodiyo University in Sokoto (UDUS), Ahmadu Bello University in Zaria (ABU), University of Nigeria, Nsukka (UNN), and The Polytechnic Ibadan, Oyo State, have voiced their grievances regarding the increased fares.

    To address the issue and prevent arbitrary fare increases, UNILAG management has specified the amount that can be charged by intra-campus transportation shuttles as well as those operating between the campus and neighboring communities such as Yaba and Akoka.

    Unilag shuttle buses

    According to a statement issued by UNILAG’s Head of Public Relations Unit Adejoke Alaga-Ibraheem, the approved fare for intra-campus shuttles has been increased from N50 to N70, while motorists plying the campus-Yaba and other routes are now permitted to charge N150 instead of the previous N100. The statement also highlighted that food vendors should maintain their pre-fuel price hike prices.

    “These developments are to be in place till the end of June, 2023, when the situation will be reviewed again, and adjustments made if necessary.

    “Management implores all members of the university community and other stakeholders to remain calm and abide by the above decisions,” the statement read.

    As the fuel subsidy removal continues to spark concerns and protests among various stakeholders, the effects on transportation costs and the overall economy remain subjects of intense debate and scrutiny.

    The Nigeria Labour Congress (NLC) has strongly opposed the removal of the subsidy, deeming it a misplaced priority and has threatened to initiate industrial action if the new fuel pump prices are not reverted to their previous levels.

    The union has notified its affiliates of the industrial action scheduled to begin on Wednesday, June 7th, which aims to demand the reversal of the petrol pump price to N185.

    In the same vein, the Nigeria Union of Journalists (NUJ) has pledged its support to the NLC, saying that it will fully participate in the strike.

     

  • Analysis: Amidst fuel hardship, food prices continue to soar in Nigeria

    Analysis: Amidst fuel hardship, food prices continue to soar in Nigeria

    In the wake of the removal of fuel subsidy by President Bola Tinubu’s administration, Nigerians are grappling with an escalating challenge as food prices continue to soar.

    The combination of fuel hardship caused the removal of subsidies has had a significant impact on transportation costs, resulting in a sharp increase in the prices of essential food items.

    However, according to the latest report from the National Bureau of Statistics (NBS), the distressing trend in food prices across the nation resumed in the first quarter of the year, just after the general elections in March.

    The NBS’ Selected Food Prices Watch Report for April, released on Saturday, highlights that key food items such as tomatoes, beans, and yams have experienced substantial price hikes, causing widespread concern among consumers.

    The average price of 1kg of tomatoes witnessed a year-on-year increase of 13.73 per cent, soaring from N426.54 in April 2022 to N485.10 in April 2023, the NBS revealed. Furthermore, on a month-on-month basis, tomato prices surged by 3.97 per cent from March 2023.

    “The sharp rise in tomato prices is a cause for concern and can be attributed to the combined effects of fuel hardship and transportation costs. These factors have contributed to the increased production and distribution costs in the tomato supply chain,” the report said in part.

    Brown beans, another dietary staple, experienced a significant price surge. The report indicates a year-on-year increase of 16.03 per cent for 1kg of brown beans, with prices rising from N530.62 in April 2022 to N615.67 in April 2023. On a month-on-month basis, brown beans prices increased by 3.13 per cent during April.

    Highlighting the impact on households, the NBS report emphasized, “The rising prices of brown beans pose a considerable burden on consumers, particularly low-income families. These price hikes can be attributed to higher transportation costs and disruptions in the supply chain.”

    The average price of 1kg of onion bulb also witnessed a year-on-year increase of 15.87 per cent, reaching N441.38 in April 2023. However, there was a slight month-on-month decline of 0.67 per cent compared to March 2023.

    Yam, a staple crop in Nigeria, faced a notable price surge as well. The average price of 1kg of yam rose by 23.12 per cent year-on-year, reaching N444.69 in April 2023. On a month-on-month basis, yam prices increased by 0.38 per cent during April.

    The report also shed light on the escalating cost of meat, with boneless beef prices rising by 23.13 per cent. The average price of 1kg of boneless beef increased from N2,026.8 in April 2022 to N2,495.69 in April 2023. Month-on-month, boneless beef prices increased by 0.65 per cent.

    The NBS report further underscored the regional disparities in food prices across Nigeria. Imo State for example, recorded the highest average price of 1kg of boneless beef at N3,277.11, while Kogi State had the lowest at N1,789.67.

    Similarly, the average price of 1kg of tomato was highest in the South-South and South-East at N849.02 and N647.96 respectively, while the lowest price was recorded in the North-East at N256.13.

    TheNewsGuru.com (TNG) reports that the rising cost of basic staple food items particularly boneless beef, has been worsened by the removal of fuel subsidy and further compounds the challenges faced by Nigerians in meeting their dietary needs.

    Analysts say to address the pressing issue of fuel hardship and soaring food prices in the country, there is need for the government to implement targeted mitigation measures that would stabilize food prices and alleviate the burden on Nigerian households.

  • We will protest in the next seven days if fuel subsidy is not reversed – Grout tells Tinubu

    We will protest in the next seven days if fuel subsidy is not reversed – Grout tells Tinubu

    A group operating under the auspices of the Free Nigeria Movement has called for immediate reversal of fuel subsidy removal by the government of President Bola Tinubu.

    The group has threatened to mobilize a mass protest if the President doesn’t revert to the old pump price of Premium Motor Spirit.

    Addressing journalists at a press conference on Thursday in Abuja, the convener of the group, Dr Moses Paul said the movement was aware of ongoing talks with the Nigeria Labour Congress, (NLC)

    He alleged that lobbying by actors for the new pump price was ongoing and called on the NLC not to succumb to anything short of reverting to the old pump price, insisting Nigerians cannot cope with the present situation.

    “We are aware of ongoing talks with the Nigerian Labour Congress (NLC) and the many actors lobbying for an acceptance of the new pump price by the NLC leadership.

    “We call on the NLC to remain steadfast.

    Dr Moses, who was flanked by the group’s executives and empty containers to demonstrate “the black market boom business at filling stations”, noted that poor people have the right to live with the rich.

    ”This is the only country we have. We will defend it with every stretch of our being standing on the law. This is the only way that Nigeria can stand for the good of all. As always, Let Nigeria Win.

    They condemned the pronouncement by President Tinubu, describing it as dictatorial, even as there were no consultations.

    “The dictatorial pronouncement on the removal of subsidy by President Bola Ahmed Tinubu, whose ascension to power awaits confirmation by the courts, is a credible specimen in the scholarly hall of politics and governance.

    The rush by his mouthpieces to ‘explain’ a clear and unambiguous statement to a deeply traumatized citizenry will make poor reference material in Damage Control”, he said.

  • Fuel Subsidy Removal: I support Tinubu on this – Charly Boy

    Fuel Subsidy Removal: I support Tinubu on this – Charly Boy

    Celebrity biker and socio-political activist Charles Oputa, known as Charly Boy has thrown his weight behind the decision of President Bola Tinubu to remove fuel subsidy.

    Since the president announced that subsidy is gone the price of fuel have skyrocketed with over 300 percent increase.

    The Petroleum Motor Spirit, PMS, is currently sold above N500 per litre in many parts of the country.

    However, Charly Boy who supported the candidacy of  Peter Obi, the presidential candidate of the Labour Party (LP) in the last election, said he supports Tinubu on this subject matter.

    In a tweet on his official handle, the singer opined that the fight is beyond support for his preferred candidate, but the alleged criminal elements disturbing the country’s economy.

    His tweet reads, “Listen and be informed. Okonjo Iweala bares it all on the subsidy removal. There can be no other time, and the time is NOW.

    “My fellow Nigerians this fight is really not about Obi. It’s about the criminals who insist on stealing our national patrimony leaving us poor and hopeless”.

  • Subsidy Removal: Nigerians Groan Over High Cost of Transportation, Commodities

    Subsidy Removal: Nigerians Groan Over High Cost of Transportation, Commodities

    Following President Bola Ahmed Tinubu’s announcement on May 29 regarding the removal of fuel subsidies, the cost of petrol has experienced a notable increase and this surge has directly impacted transportation expenses.

    TheNewsGuru.com (TNG) reports that the subsidy removal policy is part of the government’s efforts to address economic challenges, streamline expenditures, and promote fiscal sustainability.

    However, its immediate impact has been felt in the transportation sector, leading to an increase in costs for both commuters and businesses.

    Public transportation operators, including bus, taxi, and tricycle services, have raised their fares to compensate for the higher fuel costs and commuters, particularly those relying on public transportation, are feeling the pinch of increased fares, leading to reduced disposable income for other essential expenses.

    As increase in transportation costs also affects the prices of goods and services across, commodities such as food, household items, and other essential goods are already witnessing a rise in costs, imposing an additional burden on households, especially those with limited incomes.

    One affected Nigerian Mino Tauri said: “Removing fuel subsidy without fixing the problems is like having a car without wheels, it’s going nowhere. The problem doesn’t go away.”

    Public Analyst Shoba Adebayo, noted that every time there is a proposal to remove fuel subsidy, fuel marketers swiftly respond by shutting down their filling stations, depriving Nigerians of access to the already subsidized fuel they have in stock.

    “This immediate scarcity results in a period of hardship, which we are currently witnessing. Consequently, while the marketers profit from this situation, they simultaneously fuel and provoke the Nigerian people against the federal government due to the difficulties they have created,” he said.

    The recent increase in the pump price of petrol by the Nigeria National Petroleum Company Limited (NNPCL) and other fuel stations from N195 to between N537 – N570 has been met with opposition from the Nigeria Labour Congress (NLC), who consider the new price unacceptable and demand its immediate withdrawal.

    President of the Nigerian Labour Congress Joe Ajaero, expressed dissatisfaction with the lack of consensus reached in the meeting.

    He specifically criticized the Nigerian National Petroleum Corporation Limited for releasing an official statement that revised the petrol pump price at its filling stations across the country, stating that this action had created a challenging situation for the labor unions during the negotiation process.

    “The subsidy provision has been made up to the end of June. And before then, conscious people, labour management, government, should be able to think of what will happen at the end of June. You don’t start it before the time,” Ajaero said.

    A spokesperson for the Federal Government Dele Alake, announced during a press briefing that the discussions would continue at a later date.

    “We are continuing talks at a later date, very very shortly. But the important thing is that talks are ongoing. It’s always better to keep talking with a view to arriving at a very amicable solution that would be in the interest of all Nigerians. That’s the much we can say now,” Alake said.

    The surge in transportation costs contributes to inflationary pressures within the economy, as Small and medium-sized enterprises (SMEs) that heavily rely on transportation for their operations face increased operational expenses.

    Proffering solutions to the situation, legal practitioner Adonye George, advised the government to consider measures to stabilize fuel prices, such as diversifying energy sources, improving refining capabilities, and encouraging investment in alternative energy solutions.

    He added: “Introducing targeted subsidies for public transportation services can help alleviate the burden on commuters and ensure affordable transportation options for the general public.

    “Implementing policies and initiatives to support small businesses affected by increased transportation costs can help them remain competitive and minimize the negative impact on employment.”

    Nigerians expect that the Tinubu-led administration would take proactive steps to address the challenges arising from this policy change, focusing on measures to stabilise fuel prices and provide the necessary support to mitigate the impact on the general public.

  • Keyamo speaks on fuel subsidy removal

    Keyamo speaks on fuel subsidy removal

    Nigerian lawyer, columnist and human rights activist,  Festus Keyamo has noted that President Bola Tinubu did not remove oil subsidy.

    According to Keyamo, Tinubu only inherited a budget that made no provision for fuel subsidy.

    Recall that during his inaugural speech at Eagles Square, Tinubu  said fuel subsidy was gone.

    Following his announcement, many filling stations  hiked the pump price of their petroleum products, whilst some closed up.

    Also, long queues have returned to filling stations across the country.

    The lawyer took to his Twitter handle to express his mind on the fuel subsidy removal.

    In his reaction to the subsidy removal,  Keyamo said Tinubu would have been starting on an illegal note if he had reintroduced fuel subsidy during his speech.

    Keyamo’s tweet reads: “A section of the Press is mischievously twisting the narrative to read that TINUBU’s GOVERNMENT HAS REMOVED SUBSIDY. That is NOT CORRECT. TINUBU’s govt has merely inherited a regime where there was no provision for subsidy in the 2023 Appropriation Act as from June, 2023 and the Petroleum Industry Act which is now extant has no provision for subsidy.

    “President Tinubu merely acknowledged this state of affairs in his inaugural speech at the Eagle Square.

    “So any advocate of subsidy should convince the Nigerian people why President Tinubu should start on a note of illegality by promising to reintroduce something which the law has taken away.

    “They should also convince the Nigerian people why President Tinubu should embark on a present illegality that gulped $10 billion of our scarce or unavailable resources in 2022 alone.

    “Those claiming to defend the right or welfare of workers should convince the Nigerian people that $10 billion injected into the economy yearly will not jumpstart the economy enough as to create massive jobs and even increase the same minimum wage they complain about.

    “That is the conversation the Nigerian people are prepared to have now.”

  • Sani lauds Tinudu over fuel subsidy removal

    Sani lauds Tinudu over fuel subsidy removal

    The former lawmaker representing Kaduna West, Senator Shehu Sani, has lauded President Bola Ahmed Tinubu for the removal of  fuel subsidy, starting from June 1st, 2023.

    TheNewsGuru.com reports that the newly sworn-in president had, during his inaugural speech, said the subsidy is no longer sustainable in the country, stressing that it is gone.

    Reacting,  to the statement by Tinubu, Sani, via a tweet on his verified Twitter handle, praised President Tinubu, stating that it is the right time to take tough decisions that are capable of revamping the nation’s economy.

    His tweet reads: “Within seven months last year, the CBN ‘defended’ the naira with $11.24 billion. Currently, petrol subsidy consumes N400 billion monthly.

    “There is no better time to take tough economic decisions to revamp our economy than now. The culture of allocating foreign exchange to elites with multiple bureaus de change to sell on the black market must end.

    “The opacity of the subsidy regime’s chains of fraud must also end.”