Federal government has postponed the planned petrol subsidy removal till further notice due to “high inflation and economic hardship”.
Subsidy or under-recovery is the underpriced sales of premium motor spirit (PMS), better known as petrol.
The government had planned to stop subsidy payments on petroleum products from July this year.
Zainab Ahmed, minister of finance, budget, national planning, disclosed this on Monday in Abuja at a meeting with Senate President Ahmad Lawan.
The meeting had Timipre Sylva, minister of state for petroleum resources; representatives of oil companies, among others, in attendance.
Last week, Lawal had said Buhari did not direct the removal of petrol subsidy, saying their “constituents are raising concerns over the policy”.
National Economic Council (NEC) said it was still considering the recommendations of its ad-hoc committee — which proposed full deregulation and N302 per litre for PMS.
Petrol subsidy payments gulped N1.43 trillion in 2021, shrinking revenue accrued to the federation account to N542 billion — a shortfall from the projected N2.51 trillion. In December 2021, Nigeria spent N270.83 billion to cater for the cost of petroleum shortfall.
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.
“Provision was made in the 2022 budget for subsidy payment from January till June. That suggested that from July, there would be no subsidy,” Ahmed said.
”The provision was made sequel to the passage of the Petroleum Industry Act, which indicated that all petroleum products would be deregulated.
“Sequel to the passage of the PIA, we went back to amend the fiscal framework to incorporate the subsidy removal.
“However, after the budget was passed, we had consultations with a number of stakeholders, and it became clear that the timing was problematic.
“We discovered that practically, there is still heightened inflation and that the removal of subsidy would further worsen the situation and impose more difficulties on the citizenry.
“Mr President (Muhammadu Buhari), does not want to do that. What we are now doing is to continue with the ongoing discussions and consultations in terms of putting in place a number of measures.
“One of these include the roll-out of the refining capacities of the existing refineries and the new ones, which would reduce the amount of products that would be imported into the country.
“We, therefore, need to return to the National Assembly to now amend the budget and make additional provision for subsidy from July 2022 to whatever period that we agreed was suitable for the commencement of the total removal.”
On his part, Lawan appealed to the leadership of Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) to shelve their planned industrial action over subsidy removal as it has become unnecessary.