FG says petrol subsidy will stop from July 2022 as World Bank criticizes policy

The Federal Government has announced plans to discontinue the payment of petrol subsidy by the second half of 2022.

This is as the World Bank has condemned the continuous heavy expenditure by the Federal Government on petrol subsidy which affects spending in other critical sectors.

This was made known by the Minister of Finance, Budget and National Planning, Zainab Ahmed, while speaking at a panel session during the ongoing 27^th National Economic Summit, on Monday, October 25, where she said that the federal government has made provision for petrol subsidy till the end of the year.

What the Minister of Finance is saying

Ahmed said, “In our 2022 budget, we only factored in subsidy for the first half of the year; the second half of the year, we are looking at complete deregulation of the sector, saving foreign exchange and potentially earning more from the oil and gas industry.’’

Also speaking during the panel session at the summit, the World Bank Country Director for Nigeria, Shubham Chaudhuri, who had earlier decried the huge expenditure on petrol subsidy, which will likely gulp N2.9 trillion this year, said the country could channel the money being spent on subsidy to primary healthcare, basic education and rural roads.

What the World Bank Country Director for Nigeria is saying

Chaudhuri, who likened Nigeria to a malnourished individual needing urgent treatment, pointed out that some critical decisions need to be made immediately for the country to realize its potential.

He said, “This year, Nigeria is on track to spend N2.9tn on PMS subsidy, which is more than it spends on health. I think the urgency of doing something now is because the time is going in terms of retaining the hope of young Nigerians in the future and potential of Nigeria. The kinds of things that could be done right away – the petrol subsidy; yes, I hear that six months from now, perhaps with the PIA (Petroleum Industry Act) coming into effect, this will go away.

“But the fact is can Nigeria even afford to wait for those six months? And there is a choice: N3tn to PMS subsidy which is depriving states of much-needed revenues to invest in basic services.”

Also, the Chairman, Presidential Economic Advisory Council, Prof. Doyin Salami, said he had argued for a long time that subsidy really needed to go.

He said, “My view will be if we could get it done sooner than that, it will be excellent. It releases money. The key point is simply this: we are now, any which way, at the tail end of that conversation, except if we choose not to obey the law. My sense is we will obey the law and subsidy will be gone.’’

What you should know

Recall that the Group Managing Director of NNPC, Mele Kyari, had earlier said that the Federal Government will make provision for petrol subsidy as part of its expenditure in the 2022 budget due to the non-resolution of the grey areas and outstanding issues between the federal government and the organized labour on the implementation of the full deregulation of the downstream sector of the oil industry.

The Federal Government had suspended the implementation of the deregulation of the downstream sector of the oil industry which would have led to the removal of petrol subsidy earlier, to enable it carry out wide consultation with stakeholders and organized labour.