Economy
Explainer: Why Nigeria Suspended Fuel Subsidy Removal Before June Deadline?
By Adedapo Adesanya
The National Economic Council (NEC) on Thursday, April 27, suspended the planned removal of subsidy on petroleum products by the end of President Muhammadu Buhari’s administration.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, made this known to State House correspondents shortly after the valedictory council meeting presided over by Vice President Yemi Osinbajo at the Presidential Villa, Abuja, yesterday.
The Minister stated that the council deliberated on the matter and resolved that the fuel subsidy cannot be removed for now.
The council, however, agreed on the need to continue the discussion on the matter and the necessary preparatory work in conjunction with states and representatives of the incoming administration, she said.
“[The] council agreed that the timing of the removal of fuel subsidy should not be now. But that we should continue with all of the preparatory works that need to be done and that this preparatory has to be done in consultation with the states and other key stakeholders, including representatives of the incoming administration,” she said.
“[The] council agreed that the fuel subsidy must be removed earlier rather than later because it is not sustainable. We cannot afford it anymore. But we have to do it in such a way that the impact of the subsidy is, as much as possible, mitigated on the lives of ordinary Nigerians.
“So, this will require looking at alternatives to the fuel subsidy that needs to be planned for and subsequently put in place. But also what needs to be done to support the people that will be most affected as a result of the removal.”
Mrs Ahmed added that the federal government is working with other institutions of government towards the eventual removal of the fuel subsidy.
“And if I may remind this forum that the budget for 2023 has a provision for fuel subsidy only up to June 2023, and also, the Petroleum Industry Act has a provision that requires that all petroleum products must be deregulated 18 months after the effective date of the PMS removal and that that period is also up to June 2020,” the minister said.
Earlier in January, Mrs Ahmed said that it would be more appropriate for the government to begin the implementation of its fuel subsidy policy in the second quarter of the year.
The Minister noted that the country needs to exit the fuel subsidy regime because it is a very significant contributory factor to revenue loss.
“You can look at it in two ways, the payments made are revenues that would have come to the government but don’t because it is being spent on fuel subsidy.
“Also, where there is not enough revenue to buy the refined petroleum products, we have to borrow to buy the products, so, if we take that out, that is over N3 trillion, it’s a significant relief if we do not incur any more than that number that we projected for 2023,” she said.
The Muhammadu Buhari-led administration had made plans two years ago to remove subsidy which gulped trillions in cost and set a June 2023 deadline.
By Adedapo Adesanya
Three stocks stretched the bearish run of the NASD Over-the-Counter (OTC) Securities Exchange by 1.21 per cent on Friday, December 19, with the market capitalisation giving up N26.01 billion to close at N2.121 billion compared with the N2.147 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropping 43.47 points to 3,546.41 points from 3,589.88 points.
The trio of FrieslandCampina Wamco Nigeria Plc, Central Securities Clearing System (CSCS) Plc, and NASD Plc overpowered the gains printed by four other securities.
FrieslandCampina Wamco Nigeria Plc lost N6.00 to sell at N54.00 per unit versus N60.00 per unit, NASD Plc shrank by N3.50 to N58.50 per share from N55.00 per share, and CSCS Plc depleted by N2.91 to N33.87 per unit from N36.78 per unit.
On the flip side, Air Liquide Plc gained N1.01 to close at N13.00 per share versus N11.99 per share, Golden Capital Plc appreciated by 70 Kobo to N7.68 per unit from N6.98 per unit, Geo-Fluids Plc added 39 Kobo to sell at N5.50 per share versus N5.11 per share, and IPWA Plc rose by 8 Kobo to 85 Kobo per unit from 77 Kobo per unit.
During the trading day, market participants traded 1.9 million securities versus the previous day’s 30.5 million securities showing a decline of 49.3 per cent. The value of trades went down by 64.3 per cent to N80.3 million from N225.1 million, but the number of deals jumped by 32.1 per cent to 37 deals from 28 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc finished the session as the most active stock by value on a year-to-date basis with 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units traded for N4.9 billion.
The most active stock by volume on a year-to-date basis was still InfraCredit Plc with 5.8 billion units worth N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
By Adedapo Adesanya
It was not a good day for the Nigerian Naira at the two major foreign exchange (FX) market on Friday as it suffered a heavy loss against the United States Dollar at the close of transactions.
In the black market segment, the Naira weakened against its American counterpart yesterday by N10 to quote at N1,485/$1, in contrast to the N1,475/$1 it was traded a day earlier, and at the GTBank forex counter, it depreciated by N2 to settle at N1,467/$1 versus Thursday’s closing price of N1,465/$1.
In the Nigerian Autonomous Foreign Exchange Market (NAFEX) window, which is also the official market, the nation’s legal tender crashed against the greenback by N6.65 or 0.46 per cent to close at N1,464.49/$1 compared with the preceding session’s rate of N1,457.84/$1.
In the same vein, the local currency tumbled against the Euro in the spot market by N2.25 to sell for N1,714.63/€1 compared with the previous day’s N1,712.38/€1, but appreciated against the Pound Sterling by 73 Kobo to finish at N1,957.30/£1 compared with the N1,958.03/£1 it was traded in the preceding session.
The market continues to face seasonal pressure even as the Central Bank of Nigeria (CBN) is still conducting FX intervention sales, which have significantly reduced but not remove pressure from the Naira. Also, there seems to be reduced supply from exporters, foreign portfolio investors and non-bank corporate inflows.
President Bola Tinubu on Friday presented the government’s N58.47 trillion budget plan aimed at consolidating economic reforms and boosting growth.
The budget is based on a projected crude oil price of $64.85 a barrel and includes a target oil output of 1.84 million barrels a day. It also projects an exchange rate of N1,400 to the Dollar.
President Tinubu said inflation had plunged to an annual rate of 14.45 per cent in November from 24.23 per cent in March, while foreign reserves had surged to a seven-year high of $47 billion.
Meanwhile, the cryptocurrency market was dominated by the bulls but it continues to face increased pressure after million in liquidations in previous session over accelerating declines, with Dogecoin (DOGE) recovering 4.2 per cent to trade at $0.1309.
Further, Ripple (XRP) appreciated by 3.9 per cent to $1.90, Cardano (ADA) rose by 3.5 per cent to $0.3728, Solana (SOL) jumped by 3.4 per cent to $126.23, Ethereum (ETH) climbed by 2.9 per cent to $2,982.42, Binance Coin (BNB) gained 2.0 per cent to sell for $853.06, Bitcoin (BTC) improved by 1.7 per cent to $88,281.21, and Litecoin (LTC) soared by 1.2 per cent to $76.50, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
By Adedapo Adesanya
Crude oil prices edged up on possible disruptions from a US blockade of Venezuelan tankers as the market waits for news about a possible Russia-Ukraine peace deal.
Brent futures rose 65 cents or 1.1 per cent to $60.47 per barrel while the US West Texas Intermediate (WTI) futures expanded by 51 cents or 0.9 per cent to $56.66 per barrel. Both Brent and WTI were down about 1 per cent this week after both crude benchmarks fell about 4 per cent last week.
US President Donald Trump said he was leaving the possibility of war with Venezuela on the table, noting that there would be additional seizures of oil tankers near Venezuelan waters after the US seized a sanctioned oil tanker off the coast of Venezuela last week.
The American President this week ordered a “blockade” of all sanctioned oil tankers entering and leaving Venezuela, in the US’ latest move to increase pressure on Nicolas Maduro’s government, targeting its main source of income. The pressure campaign on President Maduro has included a ramped-up military presence in the region and more than two dozen military strikes on vessels in the Pacific Ocean and Caribbean Sea near Venezuela, which have killed at least 90 people.
President Trump has also previously said that US land strikes on the South American country will soon start.
Meanwhile, US Secretary of State Marco Rubio on Friday said that the US is not concerned about an escalation with Russia when it comes to Venezuela, as the Trump administration builds up military forces in the Caribbean.
This development comes as President Trump seeks an end to the unending war between Ukraine and Russia that is heading towards its fourth year.
European Union leaders decided on Friday to borrow cash to loan 90 billion Euros to Ukraine to fund its defense against Russia for the next two years as Russian President Vladimir Putin offered no compromise on Friday on his terms for ending the war in Ukraine and accused the European Union of attempting “daylight robbery” of Russian assets.
Ukraine, meanwhile, struck a Russian “shadow fleet” oil tanker in the Mediterranean Sea with aerial drones for the first time.
Earlier this week, the US and Ukraine both signaled progress in negotiations about a peace agreement during talks in German capital city of Berlin. The US is now reportedly offering Ukraine security guarantees modeled on NATO’s Article 5 mutual defense pledge.
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