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April 25, 2023

Stakeholders, others disagree over $800m fuel subsidy palliative

Petrol scarcity

By Ediri Ejoh

STAKEHOLDERS in the petroleum industry, weekend, frowned over the Federal Government’s proposed $800 million fuel subsidy palliative to be shared with Nigerians.

As part of a palliative targeted at easing the pains of Nigerians, $800 million has been proposed for distribution to 10 million households.

But in an interview with Energy Vanguard, Executive Director of Emmanuel Egbogal Foundation, Professor Wumi Iledare, said, “Subsidy is not anti-economics but the application of the tool has become an enigma in Nigeria’s economy perhaps because of lack of transparency and accountability. However, borrowing money for transfer payments to avert social unrest or protest against PMS subsidy removal is not sustainable and it is just a postponement of the evil day.

“The option for the government today is a partial price deregulation phased over a period by regulation with price modulation mechanism.

“Price discrimination is also a possibility, which has theoretical underpinnings. The $800 million seems to be politically laudable. It’s not just economically feasible in the long term to minimize the social welfare losses that come with subsidy. Increasing wages is not recommended under the prevailing inflationary economy. It will be a double shock to a sluggish economy.

Also, Managing Director, Winman Nigeria Limited, Dr. Godwin Orovwiroro, faults the government’s planned palliative, adding that “the $800 million loan is intended to cushion the impact of subsidy removal particularly the effect on the economically disadvantaged Nigerians. Subsidy removal has been on the front burner of economic and political policies and it appears to be the only issue being flaunted by politicians as our economic ailment.”

He said: “Some believe that its removal will cure our social malaise. These are narrow-minded approaches as no empirical evidence exists to show that the injection of the loan will solve anything. Let us examine the basis of fuel subsidy. The government’s position is that the cost of importation, including landing charges is more than the selling pump price. The differential being borne by the government represents the subsidy since the dispensing price is fixed and not subject to market forces.

“What they fail to tell us is that as long as the Naira keeps falling against the dollar, the subsidy malaise will never be cured. The exchange rate has become the amplifier of subsidy and the equation will always tilt to the negative until we embark on production for export to stabilize the exchange rate.”

by the government to ease logistics of fuel distribution across the country as well as domestic freight costs.”

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