Nigeria’s President, Muhammad Buhari will implement oil subsidy removal before the end of his administration on May 29th 2023.
This was disclosed by the Nigerian Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed during a courtesy visit to Voice of Nigeria headquarters in Abuja.
She said the implementation of the policy had been delayed because of the general election and the forthcoming National census.
“The fuel subsidy is one of those political economic decisions that you don’t want to have but you’re stuck with it anyway. But we’ve come to the point when almost everybody has agreed that this is really not serving the people that it is supposed to service and the cost of it has become so high that it’s adding into our deficit. And right now, we have an approval within the appropriate shouldn’t act to exit subsidy by June 2023. Or at least I can say the Appropriation Act made provision that only allows subsidies up to June 2023.
“So, we have to find ways in which we have to remove the subsidy and allow the market to flourish. When you remove the subsidy, then you have marketers that would be able to invest and bring this fuel product and sell it at market prices right now. And NNPC is the sole importer, it is imported and it is limited to an official price. So the the subsidy per letter now ranges, anything from 350, sometimes up to 400 per liter, the subsidy that government is carrying just imagine what you can do with 250 billion naira per month because that’s the average cost per month to the nation that is even the cost to NNPC, there’s an implicit subsidy of FX.
“Now, we have not even calculated or included in this 250, there’s so much you can do. You can build more hospitals, more schools provide more social services, improve infrastructure that will enhance the quality of life of the people instead of just using it on a consumption item, you put gas in your car and in a couple of days is gone and then you have to put again. So we do hope that this time around, that the whole country will work with the government to get rid of this subsidy to save us from continuously expending limited resources on a consumption item,” she explained.
Mrs. Ahmed however adviced the next administration to increase Value Added Tax, VAT to 10% saying it will stimulate growth.
She says, “So we have used the finance bills to block leakages to strengthen the FIRS and the Nigeria customs service, we have done automation of the two institutions through that process. So tax compliance has increased. As a result, we have also been able to adjust our VAT rate from 5% to 7.5, even though our target was to 10%, too, but you know how it is in Nigeria, we’re targeting 10% By the second year, but we did so to increase revenue. VAT was one of the ways to increase revenue and we still have to increase VAT because as 7.5%, Nigeria is the lowest VAT rate in the world, not in Africa, in the world. In Sub Saharan Africa, the Africa average is 18%, when you increase your VAT your GDP will grow. It will further grow because it will generate more revenue and therefore more economic activities. But that is something that the next administration has to look at to incrementally adjust and increase our VAT rate because it’s too low at the level in which it is”.
Naira Redesign
Speaking on the naira redesign policy, Mrs. Ahmed noted that the government was working to resolve the challenges.
“Well, I can tell you that the President is pained by the suffering of Nigerians. And the President has directed that everything that needs to be done should be done, so the people’s sufferings are solved within the shortest period of time. I don’t think anybody realized that it was going to become this complex or this difficult for people. So certainly, the design of the project was never intended to have people go through the kind of difficulties that they went through, and the President really is not happy with that situation,” the minister added.
Confidence Okwuchi
