LAMATA issued a public notice on Friday, January 26, 2024, revealing the discontinuation of the 25-transport fare discount, through its official X (formerly Twitter) account.

Recall that on July 31, Governor Babajide Sanwo-Olu announced the reduction of transport fares of state-owned buses by 50% as well as commercial yellow buses by 25% on all routes as part of efforts to cushion the effect of the removal of the petrol subsidy.

The agency also advised Lagosians to take note of the change and to make the necessary preparations for the resumption of regular transport fare rates that were in place before the adjustment made in December.

In other words, from Monday, 29th January 2024, transport fare on regulated services return to 100%. 

In a statement released by NLC President Joe Ajaero, the organization vehemently rejected the new pump price, deeming it provocative.

Ajaero criticized the fuel price increase, stating that it was intended to exacerbate poverty levels and intensify the hardships already faced by Nigerians.

The NLC expressed deep concern over the 18% surge in fuel prices, particularly during a period of significant difficulties for the Nigerian people.

Describing the hike as “sadistic and unacceptable,” Ajaero emphasized that it displayed insensitivity and a sense of triumphalism by the government against the suffering masses.

The NLC warned that such actions could push Nigerians to the brink and potentially override any mechanisms the government claims to have put in place as safeguards.

Bensoah, the NLC’s head of information and public affairs, further stressed that the adjustment in fuel prices was unacceptable to Nigerians. He emphasized that the increase jeopardizes socio-economic security, businesses, earnings, and overall quality of life for the populace.

Furthermore, the labor movement alleged that the Federal Government is contemplating raising fuel prices as high as N1,000 per litre.

The union questioned the benefits of such projected price hikes for both the people and the economy, particularly considering the ongoing discussions surrounding economic recovery.

NLC Warns Federal Government Against Provocative Fuel Price HikeThe NLC’s strong stance against the fuel price increase highlights growing concerns and frustrations within the Nigerian populace.

As Nigerians grapple with the persistent challenges of rising fuel costs and economic hardships, the NLC’s resistance serves as a call for the government to address the pressing issues and prioritize the well-being of its citizens

Both labor unions argue that the offered amount is grossly inadequate to alleviate the hardships faced by workers due to the elimination of subsidies.

In an interview with reporters in Abuja, Hakeem Ambali, the National Treasurer of the NLC, raised concerns about the limited coverage of palliative.

He questioned the extent to which this sum could alleviate the economic hardships faced by over 125 million Nigerians living in poverty.

Ambali suggested various measures that could effectively mitigate the impact of subsidy removal.

These include a substantial minimum wage increase of 300% for all workers, granting licenses for modular refineries to enable local petrol refining, providing economic stimulus loans to small and medium-sized enterprises (SMEs) at a 15% interest rate, and implementing social benefits for the elderly and unemployed youths.

Furthermore, he proposed initiatives such as agricultural loans at favorable rates from institutions like the Agricultural Bank and community banks, investment in alternative energy sources like solar power and Compressed Natural Gas, refinery repairs, reversing the privatization of electricity due to poor performance, executing metro rail line projects across state capitals, and reducing tertiary institution school fees.

The rejection of the N500 billion palliative by the labor unions highlights their concerns regarding the severity of the economic impact of fuel subsidy removal and the inadequacy of the proposed measures to address it.

The unions argue for a more comprehensive approach that encompasses substantial wage increases, localized refining capacity, support for SMEs, and investments in alternative energy sources.

President Tinubu’s request to amend the 2022 supplementary appropriation Act reflects the government’s acknowledgment of the need to address the challenges arising from subsidy removal.

However, it remains to be seen how the government will respond to the labor unions’ calls for broader measures that address the root causes of economic hardships and provide sustainable solutions.

As the discussions continue, the government needs to engage in constructive dialogue with the labor unions and consider comprehensive measures that address the concerns of all stakeholders involved.

Balancing the needs of the Nigerian people, the economy, and the long-term goals of sustainable development will be crucial in navigating this complex issue

This editorial emphasizes the importance of increasing salaries and implementing supportive measures, including the idea of government-supported loans, to cushion the effects of inflation and subsidy removal.

One potential solution to ease the financial strain on employees is to establish a system where companies in Nigeria offer loans to their workers. However, the implementation of such a program requires careful planning and consideration. 

Clear guidelines and regulations must be established to ensure fair and responsible lending practices, with the government providing oversight to prevent exploitation or unfair practices. 

Evaluating the feasibility and long-term sustainability of this program, including mechanisms for repayment, interest rates, and eligibility criteria, is crucial for its success.

The successful implementation of this program necessitates collaboration between the government, private sector, and financial institutions. 

Together, they can design and implement the loan system effectively, taking into account the diverse needs and challenges faced by workers. 

Additionally, prioritizing financial education and literacy programs will empower workers to make informed decisions and understand the implications of taking loans, fostering responsible borrowing practices.

While the loan program may provide temporary relief, increasing salaries remains a vital aspect of addressing the inflation and subsidy challenges. Leading organizations like GTBank have set an example by implementing salary increases for their junior staff members. 

Other banks making similar moves indicate a growing recognition of the need to prioritize fair remuneration. However, more companies need to follow suit, ensuring that employee wages align with the rising cost of living.

A few weeks ago, the Trade Union Congress of Nigeria (TUC) demanded a new minimum wage of N200,000 monthly to alleviate the burden on workers. The government should take this demand seriously and engage in constructive dialogue with the TUC to find a mutually beneficial resolution. 

Reverting to the previous pump price of petrol per liter, may not be feasible considering the situation the country is in currently. However, such a move would create a conducive environment for negotiations, facilitating the implementation of a fair and sustainable minimum wage. The involvement of state governors in this process is crucial to ensure uniformity and effective enforcement across the nation.

A recent report by Phillips Consulting Limited sheds light on the dire consequences of rising prices and inflation on Nigerian households. The survey reveals that over two-thirds of citizens have had to reduce essential and non-essential expenses, negatively impacting their quality of life. 

Moreover, the report highlights that inflation has pushed millions of Nigerians into poverty, worsening an already alarming situation. The government must pay attention to these findings and take immediate action to address the severe challenges faced by its citizens.

To overcome these challenges, collaboration between the government, private sector, and civil society is paramount. The Lagos Chamber of Commerce and Industry rightly emphasizes the need for both monetary and fiscal policies to control inflation and mitigate its adverse effects. 

While the government focuses on macroeconomic measures, including supply-side interventions, it must also work closely with the private sector to ensure that salary adjustments reflect economic realities and alleviate the burden on workers.

It is crucial for the Presidential Committee on Salaries, in collaboration with the National Salaries, Incomes, and Wages Commission, to expedite the review of salary structures and propose fair adjustments.

On the final note, the twin challenges of inflation and subsidy removal require immediate attention from both the private and public sectors in Nigeria. As companies like GTBank set an example by increasing salaries, others must follow suit to ensure fair compensation for their employees. 

Simultaneously, the government must engage in constructive dialogue with the TUC and commit to implementing a new minimum wage that adequately addresses the rising cost of living.

Only through collaborative efforts and a shared commitment to the well-being of the workforce can Nigeria navigate these challenges and foster economic stability and social progress.

The Nigeria National Petroleum Company (NNPC) Limited has officially adjusted its pump price to N537 per liter in Abuja, while in Lagos State, the retail fuel price is now N488 per liter. It is expected that other fuel marketers will follow suit and adjust their prices accordingly.

This move by the government comes as the NNPC, being the sole supplier of petrol in Nigeria, plays a crucial role in ensuring energy security. The adjustment in fuel prices is evident across various states, with different regions experiencing varying price increases.

For instance, in Abuja and other North-Central States, the price has risen from N189 to N194 to N537 per liter. In Lagos and other South West States, prices have increased from N184 to N189 per liter to between N488 and N500.

In the South East, the price has gone up from N184 to N189 per liter to between N515 and N520, while in the North-West, it has risen from N194 to N540 per liter. In the North-East, prices have increased from N199 to N550 per liter.

The decision to remove the subsidy on PMS was welcomed by the NNPC as it had been shouldering the burden of the subsidy on behalf of the federation.

The subsidy claims had affected the company’s cash flow and sustainability plans, with the federal government unable to refund the subsidy. By removing the subsidy, the NNPC can focus on its commercial operations and deliver dividends to its shareholders.

The NNPC reassured Nigerians that it has sufficient storage and supply of PMS, urging the public not to engage in panic buying.

It is working in collaboration with the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to develop a framework for implementing the removal of the subsidy.

As the supplier of last resort mandated by the Petroleum Industry Act (PIA), the NNPC will continue to ensure the availability of PMS and other petroleum products.

The removal of fuel subsidies had been anticipated, as the federal government has been taking steps to stop the payment of subsidies.

The 2023 Fiscal Framework and Appropriation Act, as well as the Petroleum Industry Act (PIA), have provisions for the government to exit fuel subsidies by June 2023.

The decision to remove the subsidy reflects the government’s recognition of the unsustainable nature of fuel subsidies. The monthly subsidy burden had reached approximately N400 billion, posing a significant challenge for the state to bear.

This move is likely to have a direct impact on the cost of living for Nigerians, as increased fuel prices can lead to higher transportation costs and inflationary pressures. It may also have implications for various sectors of the economy, including transportation, manufacturing, and agriculture, which rely heavily on affordable fuel prices.

Overall, the removal of the fuel subsidy represents a significant policy shift aimed at addressing the fiscal challenges associated with subsidies.

The government’s focus is now on developing a more sustainable and efficient energy sector that can support economic growth and development in Nigeria

After the NEC meeting at the Presidential Villa in Abuja, Thursday, which was presided over by Vice President Yemi Osinbajo, Minister of Finance, Budget, and National Planning, Mrs. Zainab Ahmed, made this announcement while briefing State House reporters.

Because the Petroleum Industry Act, or PIA, and the 2023 budget had previously allowed for the withdrawal of the subsidy, she said that it would probably go into effect in June. As a result, any delay might necessitate amending the PIA and the budget provision, Vanguard reported.

The Minister, however, said that there was no deadline given for the subsidy removal and that the incoming administration will decide on when possible to do that.

A few weeks ago, the Federal Government said it had secured the sum of $800 million from the World Bank, as part of its post-subsidy palliative plans.

Should Nigeria forge ahead to remove the subsidy, fuel prices in Nigeria would be sold between N360 and N400 per litre after the removal of the petroleum subsidy by the government.

At a hearing of the House of Representatives special ad hoc committee on Petroleum Products Subsidy Regime in Nigeria from 2017 to 2021, Governor Godwin Emefiele disclosed the information.

The CBN Governor informed the legislators before the probe hearing even started that he could only respond to inquiries about technical aspects of subsidy payments.

I’ll be able to answer these questions here. He said that if they fall outside of the technical parameters of the subsidized transactions, I won’t be able to answer.

Recall that Finance Minister Zainab Ahmed said Nigeria could spend up to N6.72 trillion ($16.2 billion) next year if it keeps a fuel subsidy in place, a nearly 70% jump from this year’s budget.

TechEconomy understands that lawmakers in April approved a 4 trillion naira petrol subsidy for 2022 when President Muhammadu Buhari asked for additional funds to offset higher global oil prices driven by the conflict in Ukraine.

Hussein Kagara, the top bank’s Deputy Director of Banking Services, spoke for Emeifele when he informed the legislators that the regulator was unable to print out the subsidy payment paperwork due to its size.

His justification was not well received by the committee, however, as Mark Gbilah (NNPP Benue) claimed that N6.7 trillion had been spent on subsidies in less than a year and demanded that the CBN Governor personally appear to address the matter alongside the Executive Chairman of the Federal Inland Revenue Service (FIRS).

In order to conduct further hearings, the committee subpoenaed witnesses to appear on August 18.

While announcing its oil revenue, the Nigerian National Petroleum Corporation (NNPC), said there was no money to remit to the federation account, a joint pool operated by the federal, state, and local governments.

Details of the June FAAC report obtained by TechEconomy reveal that NNPC since the start of the year made N1.897 trillion, over N234.1 billion more than the expected revenue.

The oil revenue generated was used to pay for petrol subsidy, oil search, pipeline security & maintenance cost, National Domestic Gas Development, and Nigeria Morocco Pipeline cost among others.

NNPC said in its report that it paid N327.06 billion as subsidy in May, representing a 20.4 percent increase from the previous month and the highest on record this year.

Analysis of the report shows that the oil firm paid N210.38 billion, N219.78 billion, N245.77 billion, and N271.59 billion as subsidies on petrol in January, February, March, and April, respectively.

The report reads: “the Value Shortfall on the importation of PMS recovered from May 2022 proceeds is N327,065,907,048.06 while the outstanding balance carried forward is N617bn .”

“The estimated Value Shortfall of N845,152,863,012.97bn (consisting of arrears of N617bn plus estimated May 2022

Value Short Fall of N227,721,200,478.23) is to be recovered from June 2022 proceed due for sharing at the July 2022 FAAC Meeting,” it added.

President Muhammadu Buhari’s administration recently deferred the implementation of the full removal of subsidy by 18 months, effectively pushing it to the next government which begins in May next year.

TechEconomy reported on Monday that the Nigerian government must be transparent and decisive in dealing with the issue of subsidy after economists warned that the payment was fraudulent and unproductive.

Fuel Subsidy

During the hybrid launch of the World Bank’s Nigeria Development Update titled: “The Urgency for Business Unusual,’ held in Abuja. Some of the key stakeholders said continuous retention of the controversial fuel subsidy regime was hurting Nigeria’s ability to service its debts.

Zainab Ahmed, Minister of Finance, Budget and National Planning said subsidy is costing Nigeria an additional N4 trillion than originally planned which is an unplanned deficit.

“We have gone to the National Assembly; we have gotten approvals, but the approval was simply for us to cut down on some of the investment costs.

“So, investments that we needed to make in oil and gas sector which we are delaying and deferring to a later time and reducing the rollout of those investments. But we also had asked that we needed to borrow more which is very serious.

“Already we have borrowing increasing significantly and we are struggling with being able to service debt because even though revenue is increasing, the expenditure has been increasing at a much higher rate so it is a very difficult situation.”

She said further: “So Nigerians need to understand that this PMS subsidy we are carrying now is hurting the nation, its impeding the government’s ability to be able to invest in human capital development. N4.5 trillion is money that we could have invested in health or education.

“But where we are investing it in consumption, which is very wasteful, because how many Nigerians own cars that are benefiting from this subsidy.”

TechEconomy gathered, weekend, that some filling stations in Ilasamaja sold fuel at the rate of N180 per liter as against N165 sold previously. Queues had also started springing up in most filling stations in the metropolis.

It is this ugly situation that has resurfaced the conversation around fuel subsidy, the components, and the true cost, vis a vis the economy.

Data from the Nigerian National Petroleum Corporation, NNPC, Limited notes that payments for petrol subsidy cost the Federation Account N1.217 trillion in the first five months of 2022.

But the World Bank last week estimated that the increase in the global price of crude oil will push the fuel subsidy budget of the federal government from the current N4trn to about N5trn by the end of 2022.

Nigeria’s crude oil production averaged 1.42 million barrels per day (bpd) in May. The figure is 70,000 bpd higher than the average crude oil production in April.

Recall that the Nigerian government had set in motion plans to remove the subsidy late last year. But after wider consultations with stakeholders, it became untenable.

Economists are saying that fuel subsidy ought to have been removed many years as the non-removal compels the Central Bank of Nigeria (CBN) to continue to squander money.

“Fuel subsidy is clearly fraudulent, inefficient, and unproductive,” Godwin Owoh, Professor of Applied Economics, noted in a 100-page report seen by TechEconomy.

“When other countries talk about subsidy, it is about helping companies, including public enterprises, to maximize their profits. But the subsidy is equal to fraud in Nigeria.

Nobody understands what is being subsidized. This is the argument that has been made and we don’t need to wait for the World Bank to tell us how inefficient it is,” he said.

Owoh warned that interventions were major drivers of the country’s inflation, which currently stands at 17.7 percent, and warned that they would plunge the country into a deeper economic mess.

According to the World Bank, Nigeria could stand to lose more than N3trn in revenues in 2022 because the proceeds from crude oil sales, instead of going to the federation account, would be used to cover the rising cost of gasoline subsidies that mostly benefit the rich. 

Shubham Chaudhuri, World Bank Country Director for Nigeria said with oil prices going up significantly, and with it, the price of imported gasoline, we now estimate that the foregone revenues as a result of gasoline subsidies will be closer to N5trn in 2022.

“And that N5trn is urgently needed to cushion ordinary Nigerians from the crushing effect of double-digit increases in the cost of basic commodities, to invest in Nigeria’s children and youth, and in the infrastructure needed for private businesses small and large to flourish, grow and create jobs.”

In the oil boom days when Brent oil was trading at over $140 per barrel, Africa’s largest economy failed to make transparent investments on human capital development and infrastructure.

With public debt at N41trillion, low exports, high inflation rate, unemployment, high interest rate and several negative indicators, analysts say Nigeria is heading into tough times.

According to World Bank report obtained by TechEconomy, the Nigerian economy has sunk into its lowest level in the nation’s history as it recommended the deployment of sound fiscal and monetary policies to tow it out of the doldrums.

The report titled Global Bank’s Development Updates on Nigeria, said inflation would push seven million more Nigerians into poverty by the end of 2022.

The report stated that petrol subsidies could cost Nigeria as much as N5.4 trillion in 2022, much higher than “all of the resources allocated to health, education, and social protection together”.

It also projected that net oil/ gas revenue for 2022 will fall to N1.6 trillion from N2.6 trillion recorded in 2021.

Policy Fluctuations

Dr. Marco Hernandez, Lead Economist for Nigeria at the World Bank attributed the economic nightmare to a plethora of policy distortions on the part of the Nigerian government and global shocks that have fueled inflation.

He painted a particularly worrisome picture of the Nigerian situation, that it was not just the price of imported products that were skyrocketing, but includes locally-produced goods.

Hernandez noted that the high inflation has crashed the value of the national minimum wage of N30,000 ($82), which is now worth N22,000 ($37).

The fast-eroding minimum wage aside, the World Bank reckoned that most Nigerian families earn N15,000 monthly which was worsening the poverty situation in the country.

He further stated that there is a nexus between foreign exchange rate and inflation, adding that when the former’s rates go up at the parallel market, inflation rate follows automatically.

He said: “suboptimal exchange rate management is fuelling inflation due to FX supply constraints and lack of predictability, which is ultimately leading to a rise in the parallel exchange rate which is closely associated with inflation.

“Import and FX restrictions reduce the supply of food and key staples, increasing their prices and those of associated goods. The monetization of fiscal deficits by the Central Bank of Nigeria (ways and means) and CBN’s subsidized lending to firms add to inflationary expectations”.

The report noted that despite that the rising price of crude in the international market due to the Russia-Ukraine war, Nigeria’s oil production and revenue have continued to slump because of several factors.

The Bank said it was quite concerned about Nigeria’s fiscal side, emphasizing that Nigeria needa to address fiscal deficits most urgently.

Subsidy

Reacting to the report, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, who spoke virtually noted that the huge amount spent on petrol subsidy has put the economy on ventilators and threatening its survival.

She passed the buck on subsidy removal to Nigerians.

“We really are at a crossroads and there are very difficult times. It is actually paradoxical. At a time when growth is accelerating there are so many other challenges that have gathered and are impacting the lives of the people.

“On our part, we are going to reduce the fiscal pressures caused by the increase in our deficit caused by increase in PMS subsidies. These PMS subsidies are costing us an additional N4 trillion than was originally planned.