The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu has said that the Federal Government will begin a gradual withdrawal of fuel subsidy next year.
Kachikwu disclosed this while appearing before the Joint National Assembly Committee on Finance, Appropriation and National Planning on the consideration of Medium Term Expenditure Framework (MTEF). He also stated that the subsidy put at over N1 trillion in 2015 was no longer sustainable.
“The total subsidy figure for 2015 when taken along with the NNPC will be in excess of N1 trillion. We can get this specifics but the point is largely that it does not involve NNPC because the agency takes its off-cuff. We will work towards taking those figures off our budget in 2016,” he said.
This decision to gradually remove the fuel subsidy is due to the continuous fall in oil price globally. Brent crude price hit a 7 year low on Monday trading at a price of $36.5 per barrel, has now fallen below Nigeria’s target 2016 benchmark price of $38 per barrel for the second day running.
This situation has made it unreasonable for the government to keep spending N1 trillion on subsidies, as the government would have to look for cost cutting measures to adjust to the decline in oil prices.