APC Led Federal Government Backs Down on Petrol Subsidy Removal Amid 2023 Elections

Strategic Insights -

As the Nigerian National Assembly met with the Federal Government on Monday, Finance Minister Hajia Zainab Ahmed announced that plans to remove petrol subsidy had been put on hold, amidst growing concerns ahead of the 2023 general elections. The decision comes despite the passage of the Petroleum Industry Act, which aimed to deregulate the petroleum sector and eliminate monthly subsidy payments. However, with Nigerians having accepted deregulation, the Federal Government's hesitation now raises questions about the true intentions behind the Petroleum Industry Act.

Key Takeaways:

  • The APC-led Federal Government has backed down on plans to remove petrol subsidy, citing the timing as problematic, despite the passage of the Petroleum Industry Act and the President's signing into law.
  • The National Assembly passed the Petroleum Industry Act in August 2021, but the government's decision to suspend subsidy removal has raised concerns about the true intentions behind the legislation.
  • The World Bank reported that Nigeria spent $4.5 billion (approximately 2% of GDP) on fuel subsidy in 2021, with petrol subsidy payments totaling N1.43 trillion in the same year.
  • The Petroleum Industry Act aimed to deregulate the market, eliminating monthly subsidy payments and ensuring fair competition, but the government's decision to delay this move has sparked debate about its motivations.
  • The National Economic Council ad-hoc committee had recommended raising the petrol pump price to N302 per litre by February 2022, which would allow for full deregulation of the market.
  • The APC's statement on Monday claimed that removing subsidy at this time would heighten inflation and cause undue hardship on Nigerians, but critics argue that this is a tactical move ahead of the 2023 general elections.
  • The NNPC Limited reported a drop in its annual gross revenue projection of N4.979 trillion for 2021, with a funds shortfall of N1.55 trillion, highlighting the impact of subsidy payment on the company's revenue.

Statistics:

  • Nigeria spent $4.5 billion on fuel subsidy in 2021, approximately 2% of GDP.
  • Petrol subsidy payments totaled N1.43 trillion in 2021.
  • The NNPC Limited reported a drop in its annual gross revenue projection of N4.979 trillion for 2021, with a funds shortfall of N1.55 trillion.
  • The National Assembly passed the Petroleum Industry Act in August 2021.
  • The President signed the bill into law on August 16, 2021.
  • The National Economic Council ad-hoc committee recommended raising the petrol pump price to N302 per litre by February 2022.
  • The total cost of petroleum shortfall in December 2021 was N270.83 billion, the highest cost for the PMS shortfall in the year.

Sources:

  • World Bank
  • Nigerian National Petroleum Corporation (NNPC) presentation to the Federation Account Allocation Committee (FAAC) meeting between January 19 and 20, 2022
  • APC statement signed by Sen. John Akpanudoedehe on Monday
  • Petroleum Industry Act
  • NNPC Limited annual gross revenue projection for 2021
  • National Economic Council ad-hoc committee report on petroleum pricing
  • Petroleum Industry Bill passed by the National Assembly