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
For the second consecutive session, FrieslandCampina Wamco Nigeria Plc plunged the NASD Over-the-Counter (OTC) Securities Exchange by 0.04 per cent on Thursday, March 13.
The milk producer was the only price loser during the session, weakening the gains reported by three other securities.
At the close of transactions, the price of FrieslandCampina Wamco Nigeria Plc went down by N1.88 to settle at N35.57 per share from Wednesday’s closing price of N37.45 per share.
However, Okitipupa Plc gained N3.00 to end at N330.00 per unit compared with the N327.00 per unit it traded at midweek, Geo-Fluids Plc improved its value by 20 Kobo to N3.15 per share from N2.95 per share and UBN Property Plc grew by 10 Kobo to N1.95 per unit from its previous rate of N1.85 per unit.
Yesterday, the market capitalisation of the bourse went down by N770 million to settle at N1.954 trillion compared with the preceding day’s N1.955 trillion and the NASD Unlisted Security Index (NSI) dropped 1.32 points to close at 3,384.18 points, in contrast to the previous trading day’s 3,385.50 points.
The volume of securities traded at the bourse at midweek increased by 1,204.5 per cent to 3.9 million units from the 298,845 units achieved on Wednesday, the value of securities traded by investors went up by 126.9 per cent to N23.6 million from the N10.4 million quoted at the preceding session, and the number number of deals decreased by 32.00 per cent to 17 deals from 25 deals.
Impresit Bakolori Plc was the most active stock by value (year-to-date) with 533.9 million units worth N520.9 million, followed by FrieslandCampina Wamco Nigeria Plc with 12.7 million units valued at N493.2 million, and Afriland Properties Plc with 17.2 million units sold for N352.8 million.
Also, Impresit Bakolori Plc was the most active stock by volume (year-to-date) with 533.9 million units worth N520.9 million, trailed by Industrial and General Insurance (IGI) Plc with 69.9 million units worth N23.7 million and Afriland Properties Plc with 17.2 million units valued at N352.8 million.
By Adedapo Adesanya
The Naira closed flat against the Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Thursday, March 13 at N1,540.68/$1, though FX pressure remained.
It was the first time in the last few sessions that the value of the local currency did not depreciate in the official market against the greenback.
However, the domestic currency weakened against the British Pound Sterling at the spot market yesterday by N4.19 to close at N1,990.13/£1 versus the previous day’s N1,985.94/£1.
It was also a similar situation for the Euro at NAFEM, where the Nigerian currency lost N60 Kobo to quote at N1,676.08/€1, in contrast to the preceding session’s value of N1,675.48/€1.
In the same vein, the Nigerian Naira crumbled against the US Dollar in the black market during the trading day by N5 to sell for N1,590/$1 versus Wednesday’s closing price of N1,590/$1.
Recent interventions have failed to ease pressure on the market with the country’s foreign reserves losing over $2 billion in the last month and projected to lose more as the Central Bank of Nigeria (CBN) sustains US Dollar sales to banks and debt servicing payments.
Meanwhile, in the cryptocurrency market, tokens rose despite persisting US trade war fears which are dampening risk-asset trader appetites.
Market analysts noted that concerns about a President Donald Trump triggered tariff war and a slowing economy in the US, the world’s largest economy, is not offering a clear direction.
The February print of the US Producer Price Index (PPI) came in below median expectations, copying the Consumer Price Index (CPI) results from the day prior.
On an unadjusted basis, the index for final demand advanced 3.2 percent for the 12 months ended in February, the US Bureau of Labor Statistics (BLS) stated.
Ripple (XRP) gained 3.3 per cent to finish at $2.30, Ethereum (ETH) added 1.5 per cent to sell at $1,891.13, Solana (SOL) jumped by 0.9 per cent to $124.71, Binance Coin (BNB) also appreciated by 0.9 per cent to $580.79, and Dogecoin (DOGE) rose by 0.8 per cent to $0.1685.
On the flip side, Bitcoin (BTC) crashed by 1.2 per cent to $82,033.71, Cardano (ADA) declined by 0.7 per cent to $0.7154, and Litecoin (LTC) depreciated by 0.3 per cent to $88.95, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Adedapo Adesanya
Oil prices fell by over 1 per cent on Thursday as markets weighed macroeconomic concerns from the United States as well as other countries, with Brent futures losing $1.07 or 1.5 per cent to trade at $69.88 a barrel and the US West Texas Intermediate (WTI) crude futures declining by $1.13 or 1.7 per cent to $66.55 a barrel.
The market was depressed from risk that tariff wars between the US and other countries could hurt global demand.
On Thursday, US President Donald Trump threatened to slap a 200 per cent tariff on wine, cognac and other alcohol imports from Europe, in addition to previous tariffs.
According to market analysts, this has opened a new front in a global trade war and has sent jitters to investors who are worried about stiffer trade barriers around the world’s largest consumer market.
This latest move is in response to the European Union’s plan to impose tariffs on American whiskey and other products next month, which itself is a reaction to Mr Trump’s 25 per cent tariffs on steel and aluminum imports that took effect on Wednesday.
The American president has threatened to impose an array of trade penalties since returning to the White House in January, though he has postponed action on many of them.
Also, uncertainty stemming from a US proposal for a Russia-Ukraine ceasefire also affected the market after Russian President Vladimir Putin said it agreed to stop fighting but any ceasefire should lead to a lasting peace and address root causes of the conflict.
The possibility of this could boost the availability of Russian oil.
Also on the supply front, the International Energy Agency reported that global oil supply could exceed demand by around 600,000 barrels per day this year, with global demand now expected to rise by just 1.03 million barrels per day, off last month’s forecast by 70,000 barrels per day.
The report cited deteriorating macroeconomic conditions, including escalating trade tensions.
Meanwhile, the Organisation of the Petroleum Exporting Countries said in its monthly report that the wider OPEC+ group which includes OPEC plus Russia and other allies, in February raised output by 363,000 barrels per day to 41.01 million barrels per day, led by Kazakhstan.
This comes as OPEC+ plans to phases out its most recent layer of output cuts beginning in April.
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