Friday, 22nd September 2023

Subsidy removal ‘plan’ raises anxiety as Labour breaks rank

By Gloria Nwafor (Lagos) and Terhemba Daka (Abuja)
29 March 2023   |   4:35 am
Three months to the June deadline for subsidy removal, plans by the Federal Government to scrap the scheme may meet resistance from the public and labour unions over lack of clarity regarding the process and availability of social investment programmes ..

• Labour not aware of palliative talks on subsidy
• PENGASSAN okays subsidy removal, NLC resists deadline
• Don’t impoverish masses, ASCSN charges new govt
• Palliative committee yet to harmonise positions one year after
• Ngige: Incoming administration to propose pay rise, bear palliative burden

Three months to the June deadline for subsidy removal, plans by the Federal Government to scrap the scheme may meet resistance from the public and labour unions over lack of clarity regarding the process and availability of social investment programmes that would cushion the effect of the planned exercise.

President Muhammadu Buhari, who is to step down on May 29, had planned to remove the popular, but costly subsidy in 2022, as part of fiscal and petroleum sector reforms, but abandoned the plan because of fears of protests in the run-up to 2023 general elections.

Previous administrations had also promised to remove the fuel subsidy, which many economists say is an unsustainable drag on public finances, but have failed to do so because of fierce opposition from citizens.
While there have been calls for a holistic and well-phased approach towards subsidy removal, anxiety continues to prevail as to the possible effects of such a decision, despite being economically expedient if the nation’s fiscal position will not be further jeopardised.
Though operators claim that subsidy removal may push the price of premium motor spirit (PMS), popularly called petrol, to as high as N750/litre, stakeholders in the downstream sector, have noted that the gains from removal of fuel subsidies can only be achieved through effective change management, identifying potential pitfalls and deploying mitigation strategies.
According to them, to address the unmet national demand through importation, certain guidelines, which should provide the pathway for obtaining foreign exchange, should be made public, and implemented in good time prior to the commencement of price deregulation.
Indeed, members of the organised labour have said until the refineries are operational and the country starts refining petroleum products locally, it will resist the move.

Labour said less than three months to the June deadline, Nigerians are yet to feel the safety nets and palliatives government plans to put in place post-subsidy removal, lamenting that it has been months of sufferings brought about by petrol scarcity and the cash crunch that have affected households.

BUT in what appears a major break in the ranks of organised labour, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), yesterday, declared its support for petrol subsidy removal.

Speaking with journalists at the meeting of its National Executive Council (NEC) in Abuja, PENGASSAN’s President, who is also president of the Trade Union Congress of Nigeria (TUC), Comrade Festus Osifo, said the Federal Government could go ahead to remove subsidy, though there is still lack of capacity for local refining.

According to Osifo, since crude oil, which constitutes about 90 per cent of the product cost of petrol is sold at international price, the difference between imported and locally refined petrol will be negligible.

He added that PENGASSAN has been insisting on making the local refineries functional before removal of subsidy not because it believes that the price of the product will be lower when refined locally. Rather, he said PENGASSAN believes that pumping up the local refining capacity will result in creation of jobs from the value chain.

Osifo said: “Today, if you look at the cost of importation of PMS and even the cost to produce locally, the crude cost, which is sold at international price, contributes over 80 to 90 per cent of the overall PMS cost. So, it will not necessarily bring down the price.

“The reason we are agitating that the refineries should be working is practically because we want more jobs to be created and we want the value chain to be deepened.” He, however, dismissed claims that petrol price will jump up to N750 per litre if subsidy is removed. Osifo said the calculation was based on a black market exchange rate.

He also advised the Federal Government, which has 20 per cent stake in Dangote refinery, to buy more stake in the entity to further guarantee the nation’s energy security.

He added that private refineries, like Dangote, which is already doing pre-commissioning to start refining in June, are reluctant to commence production because of the lingering subsidy regime.

He opposed the plan by the Federal Government to sell the nation’s refineries, instead advising that that the Nigerian Liquefied Natural Gas (NLNG) model can be adopted to concession the refineries to private investors.

Osifo stated that past administrations’ commitments to retaining subsidy in the country, have adversely affected cost of living and the economy at large, while it has shrunk the country’s dollar reserve and further frustrated the exchange market.  

MEANWHILE, the Minister of Labour and Employment, Dr. Chris Ngige, has hinted that the incoming administration of President-elect, Asiwaju Bola Tinubu, will give public sector workers pay rise after removing fuel subsidy in June.

Disclosing this at the 68th session of the State House Ministerial Briefing organised by the Presidential Communications Team at Aso Rock Villa, Abuja, yesterday, Ngige said: “We have already concluded on the issue of pay rise, we recommended five per cent and 10 per cent pay rise for workers in different categories.”

While the incoming government is not obliged to act on the recommendation, the call does put pressure on Tinubu to fulfill his campaign promise to remove subsidy, even though the outgoing administration failed to do so.

Tinubu, who is from the ruling party, also promised during his presidential election campaign to ramp up oil production and deregulate midstream gas prices within six months.

Tinubu said in his manifesto that he would channel the money saved on the subsidy into agriculture, social welfare, road construction, public transport subsidies, education and healthcare.

Ngige further observed that Tinubu’s administration will bear the brunt of providing palliative measures for millions of Nigerians ahead of the discontinuance of petrol subsidy in June.

Fielding a question on the issue, the minister said: “The subsidy palliatives will be left to the incoming government to implement. We’ll simply hand over to them. Of course, we will give recommendations, which they are at liberty to either accept or reject.”
However, less than three months to the deadline, the Federal Government said it is yet to harmonise its efforts with states to provide palliatives to cushion the effect of subsidy removal scheduled for June.
However, it said the concerned committees would soon conclude discussions with key stakeholders as the Buhari regime winds down.

The Minister of State for Budget and National Planning, Clem Agba, who addressed journalists recently, noted that a committee led by the Vice President, Prof. Yemi Osinbajo, and the National Economic Council, comprising governors, the governor of Central Bank of Nigeria (CBN) and other co-opted government officials, had been working to resolve the issue for over 12 months now.

Within that period, however, the committee was yet to harmonise its templates, he added, explaining that the situation requires time as it would affect the entire nation and the committees want to ensure that every citizen was carried along.

Abba said: “For over a year plus now, the Vice President, Yemi Osinbajo, has been leading a committee working on this and the National Economic Council also has a committee that has also been working on this.

“So, the stage that we are in now is how to finalise the suggestions that have come out from both the Federal Government and the governors’ side.

“Like you know, it is something that is going to affect the entire nation. They will just have to ensure that everyone is carried along, that is both the federal and sub-national governments”, he added.
The Federal Government projected to spend N3.35 trillion on petrol subsidy this year, just as Zainab Ahmed, Minister of Finance, Budget and National Planning, had said government may begin the gradual removal of the petrol subsidy from April 2023.
With about N11 trillion spent so far on fuel subsidy in seven years, the Federal Government admitted the facility was no longer sustainable, therefore, advocating its removal.
Former statistician-general of the federation and partner and chief economist of KPMG Nigeria, Oyeyemi Kale, stated that petrol subsidy removal has significant economic and social implications. 
“I do not like to look at these things by focusing on all the positives, like those that want to remove subsidies will ignore and play down the negatives, or those that do not want subsidies removed will focus on the negatives.
“I prefer the holistic approach. Look at the entire system and then, determine what is overall best for the country because any policy, including this one, will have positives and negatives. Somebody will benefit and other people will lose out from the policy,” Kale said.
Kale added that it is a cost-benefit analysis that ultimately determines what is best for the economy, adding that conversations must take place to determine how the government will provide palliatives for affected citizens to minimise the negative effects of the policy.

HOWEVER, organised labour has said that since the discussions have gone on for over a year and labour, which comprises all sectors of workers, is not part of it, then it is a non-starter.
Labour, which promised to resist any policy from the committee that is anti-people, said the government must first fix the nation’s refineries before removing subsidy.
The Nigeria Labour Congress (NLC) has said the alternative to fuel subsidy is that the local public refineries must work and also demand that Nigeria must stop 100 per cent importation of refined petroleum products.
Deputy General Secretary, NLC, Chris Onyeka, said the labour movement in Nigeria has over many decades, vehemently stated that the only way to address issues of petrol subsidies is to get the refineries to work.  He said stopping fuel subsidy in June was dead on arrival, unless the government wants to bring Nigerians on the street.
According to him, the government should allow the refineries to start working and also allow products to come from the refineries upon which Nigerians can know if there is subsidy or not. 

He said the Federal Government should not be in a hurry to impose sufferings on the masses, which would end up causing a crisis across the nation. He said it was intentional that the refineries were made to collapse so that the politicians and their allies would continue to feed fat on the masses.  
“This is causing serious damage to the economy. Until the government repairs the refineries, nobody should talk about subsidy removal. It is unacceptable that their understanding of subsidy removal is anchored on the importation of petroleum products and an increase in product pricing.
“If the government thinks they can impose anything on Nigerians, they should be prepared for battle and we will resist it. This government has manufactured all manner of suffering for Nigerians.
“One year since the committee was created, they are the ones that are managing the committee and they intentionally and decided to cripple the committee. They should allow the committee to work,” he said.
President of the Association of Senior Civil Servants of Nigeria (ASCSN), Dr. Tommy Okon, who described subsidy as a huge scam, said maybe it was one of the reasons the government does not want to involve labour in the discussions on palliatives for subsidy removal.