•Says N340 pump price’ll worsen inflation, shrink GDP
By Peter Egwuatu & Kennedy Mbele
Leading economists have warned that should the Federal Government implement its planned removal of fuel subsidy and N340 pump price increment, Nigeria risks social uprising that may be difficult to contain.
They said families would experience increased pressure on disposable income, adding that more Nigerians would fall into poverty.
Government had said it would remove fuel subsidy next year and replace it with an N5,000 monthly transport grant to 40 million Nigerians.
But in various chats with Sunday Vanguard experts said the matter may pose a serious challenge to government if not tactically managed.
Immediate past Director-General of Lagos Chamber of Commerce and Industry, LCCI, and CEO, Centre for the Promotion of Private Enterprise, said:” I believe there is a need to creatively manage the transition from the current pricing regime to a fully deregulated arrangement.
It is a tricky issue that could pose a serious challenge to government if not tactically managed. The reality is that the sentiments among the citizenry are not favourable to the deregulation of petroleum product pricing or petroleum subsidy removal. Even some elites are curiously not persuaded on the justification for the subsidy removal. If the policy transition is not properly managed, the risk of a social and political backlash could be quite high.
“No doubt there is a sound economic and business case in favour of fuel subsidy removal. But the social and political contexts are equally critical. Certainly, subsidy is not sustainable, which is why there is need to accelerate engagement with relevant stakeholders to come up with a policy transition strategy that is sustainable, realistic and pragmatic. The conversation should not only be economic but also social and political.”
On his part, Vice Executive Chairman, High Cap Securities Limited, Mr. David Adonri, said: “ Doubling the price of petrol will reverse the decline in inflation rate. It can cause a riot. Hope it is not preparatory to the commencement of Dangote Refinery.
“Also, discontinuation of fuel subsidy is an economic imperative but the petroleum industry and electric power industry need to be fully deregulated first.
Administratively fixing of the price of fuel cannot make the petroleum industry competitive and attractive to investment.”
Head of Research and Investment, FSL Securities, Victor Chiazor, said: “Once we see the removal of petrol subsidy which will take price to around N340 per litre, we expect the impact on households and the economy to be immediate as this increase will push prices of goods and services higher and largely affect businesses in the medium and small scale sector who depend on generators to power their businesses.
“We would see increased pressure on the disposable income of individuals as more of their income will be swallowed by the rising cost of goods and services.
“On the economy, we may see an initial reduction in economic activities due to high running costs while inflation is expected to rise. All of which may cause GDP growth to slow for the period if proper supplementary actions are not taken to support growth and increase economic output.
“Proper thought needs to be given to ways in which the government can support households during these periods, else we will see more people fall below the poverty line.”
A manufacturer, Akpan Okon, said: “The proposed substitution of oil subsidy with 5,000 monthly payment to the poor is nothing but a serious aberration.”
Daniel Nwegwu, a civil servant added: “Paying N5, 000 monthly to poor people across the country in order to remove subsidy is a wrong step in the wrong direction. Who is not poor in Nigeria when over 99 percent are living in abject poverty? What is the value of N5, 000 today?”
Meanwhile, the National President of the Christian Association of Nigeria, CAN, Dr. Samson Ayokunle, has urged federal government to carry all stakeholders along before subsidy on petroleum products is removed.
Ayokunle spoke yesterday in Takum, Taraba State.
He said: “Stakeholders should be involved first. Gradual withdrawal would have been better. Government needs to engage all stakeholders.
“We all know the prices of food items in the market. Without salary increment, a lot of people might find it difficult to survive.”