Page 5 - AfrOil Week 48 2021

AfrOil COMMENTARY AfrOil

According to a study commissioned by the Brit- Other observers have asked whether the
ish government, Abuja spent NGN10 trillion travel grants would truly help the government
($24.4bn) on the gasoline subsidy between 2006 achieve its aim of freeing up funds now spent on
and 2018, and according to NNPC, it spent more the gasoline subsidy for infrastructure projects.
than NGN816bn ($1.99bn) just in the first seven Lagos Chamber of Commerce and Industry
months of 2021. (LCCI) President Toki Makobunje and other
prominent business leaders cited by Vanguard
Opposition from labour groups on November 29 pointed out that if Abuja paid
Despite these heavy costs, there have been calls 40mn Nigerians a sum of NGN5,000 per month,
to keep the subsidy in place. it would end up spending NGN2.4 trillion over a
One such call came from Nigeria’s Trade period of 12 months. This is roughly equivalent
Union Congress (TUC), which argued that the to current PMS subsidy levels, they commented.
decision to eliminate gasoline price supports Also on November 29, This Day reported
was premature. Abuja should not have taken that Shubham Chaudhuri, the World Bank’s
this step, since it is still in negotiations with rep- country director for Nigeria, had raised a ques-
resentatives of labour unions on the elimination tion about the timing of the elimination of the
of the subsidy, representatives of TUC said last gasoline price supports. In an interview with
week. the newspaper, Chaudhuri noted that Nigeria’s
A second labour group, the Nigerian Labour Petroleum Industry Act (PIA) called for the sub-
Congress (NLC), was even more critical. In a sidies to be eliminated within six months of its
statement dated November 24, NLC President adoption. Since President Muhammadu Buhari
Ayuba Wabba described Abuja’s approach to the signed the PIA into law in mid-August of this
issue as misguided, declaring that the problem year, he explained, the policy change should take
was primarily the result of Nigeria’s dependence effect in mid-February of 2022 and not at mid-
on imported petroleum products, despite its year, as Ahmed suggested.
own large oil reserves. He proclaimed that NLC Meanwhile, Ian Simm, principal advisor at
would continue to back the subsidy and reject consultancy IGM Energy, raised questions about
deregulation unless the government abandoned the cost of implementing the travel grants and
its “import-driven” fuel market policies and the mechanism for their distribution. “Given
offered more support to the domestic refining Nigeria’s history of unrest in response to efforts
sector. to remove subsidies, there is room for scepticism Nigeria’s
In the meantime, Wabba argued, abandoning that the grants are little more than a means for Petroleum
PMS price supports will have the negative effect avoiding public anger [over inflation],” he told
of furthering inflation. “The contemplation by NewsBase. Industry Act (PIA)
government to increase the price of petrol by “However, long-awaited progress in the
more than 200% is a perfect recipe for an aggra- Nigerian downstream is set to significantly calls for gasoline
vated pile of hyperinflation and astronomical reduce the cost of PMS and other petroleum
increase in the price of goods and services,” he products with the launch of several modular subsidies to be
said in the statement. refineries over the next few months, and big- eliminated within
ger facilities like Dangote and the NNPC units
Questions about funding, timing will enter the picture later in 2022 and 2023,” he six months of
The plans announced by Ahmed also drew added. “Apparently set for a refining renaissance,
objections in the Senate, the upper house of Abuja may have been emboldened to the point its adoption
Nigeria’s National Assembly, but for different that it is ready to rip off the subsidy band-aid.”
reasons.
Olamilekan Adeola, the chairman of the Bumpy road to policy change
Senate’s Finance Committee, told reporters on None of the objections raised to the plan for halt-
November 24 that he was concerned about the ing the PMS subsidy are likely to prevent Abuja
proposal for paying out monthly travel grants from moving forward on this front. The Nige-
to the Nigerians who were likely to hit hardest rian government has reasonably compelling
by higher PMS prices. The 2022 budget bill, reasons to stop keeping domestic gasoline prices
which is now under discussion in the National far below market levels, and it is now legally obli-
Assembly, does not allocate the funds that will gated under the PIA to change its policy.
be needed for these payments, he noted. Addi- Even so, the uncertainties surrounding the
tionally, he said, the government has not yet said process indicate that the change may not hap-
exactly how it will determine who is eligible for pen as quickly as anticipated. As TUC noted,
the grants. the government has yet to wrap up negotiations
“I believe that if such a proposal is to come to with labour unions. And as Adeola noted, Abuja
pass, a document to that effect must be sent to has not yet identified a source for the money it
the National Assembly for us to see how feasible will need to cover the transport grants.
this is and how we identify the 40mn Nigerians As a result, Nigeria has no chance of meet-
that are going to benefit from this process,” he ing the mid-February deadline mentioned by
was quoted as saying by Vanguard. “There are Chaudhuri – and very little chance of changing
still a lot of issues to be deliberated upon and course in the summer of next year, as suggested
looked into if eventually this will come to pass, by Ahmed. Instead, the policy change is on track
[such as] how do we raise the money to pay these to unfold more in a slower and more chaotic
40mn Nigerians.” fashion. ™

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