In less than three months, the Nigerian government was able to save N1.83 trillion through the removal of the petrol subsidy. According to the Federation Account Allocation Committee (FAAC), this significant gain came from the revenue accumulated in June and July. The sum was reportedly put away in the federation account as a safety net in case unforeseen circumstances arose in the future. It includes N1.05 trillion, taken from the N1.97 trillion in revenue that was accumulated in June, and an additional N779.89 billion, taken from the N1.746 trillion in revenue that was accumulated in July.
Wale Edun, who is both the Minister of Finance and the Coordinating Minister for the Economy (CME), shared what the government’s plans are with the funds that have been set aside. Edun has stated that the intention is to refrain from taking out any loans or borrowing in order to carry out the projects that have been scheduled. The administration, which is led by Bola Ahmed Tinubu, intends to provide the groundwork for independently funding important projects.
Maintaining macroeconomic stability is preferred over additional debt.
At the 63rd annual conference of the Nigerian Bar Association (NBA), President Tinubu stated that the country’s economy could no longer survive if 90 percent of government revenue went towards paying off the country’s debts. At a recent Federal Executive Council (FEC) meeting, he also reaffirmed his intention to prioritise maintaining macroeconomic stability over taking on additional debt to fund new initiatives. President Tinubu has declared that there shall be no further accumulation of debts. The CME has informed the FAAC and revenue-generating organisations of its stance.
The accumulated funds generated from subsidy have been set aside and are being safely held in the federation account of the Central Bank of Nigeria (CBN). Most members of the FAAC agreed with the government’s assertion that some of the revenue going into the Federation Account should be set aside to ensure that allocations never fall below a certain level. Any time the available amount for the month is less than this minimum, FAAC can use the savings to increase the amount distribution.
Fuel subsidy removal causes a burden for Nigerians and the economy.
Several attempts to eliminate the petrol subsidy by previous administrations have led to protests and resistance in the past. However, following President Bola Tinubu’s inauguration on May 29, his administration succeeded in ending the subsidy. Since Nigerian refineries are inoperable, the country continually imports refined petroleum in order to meet its need for the product. The importation of fuel places a burden on the local currency, while the subsidy primarily benefited organised crime and provided a margin of manoeuvrability for arbitrage, as well as the illegal transit of petrol to nations that are nearby.
Eliminating fuel subsidy in Nigeria has had far-reaching repercussions on people’s daily lives. It causes inflation and increases transportation expenses due to rising fuel prices. The economic fallout includes a decline in employment and difficulties for local businesses. Historically, protests and social unrest have occurred when residents express unhappiness, especially among low-income groups. However, this strategy can free up budgetary resources for use. Due to the rising cost of petrol, this has increased people’s interest in exploring other energy options.
Private sector affirms support for the president’s initiatives.
On the other hand, Chairman of HEIRS Holdings and Transcorp Plc Tony Elumelu praised President Tinubu for making difficult decisions that were in the country’s best interest. Elumelu met with the president privately and relayed the support of the private sector for the initiatives taken. Elumelu said that the president’s actions would benefit the people, the youth, and the women of the country by creating new chances and giving them more power, and he urged his fellow citizens to be patient as the country undergoes a period of transformation. As he pointed out, Rome was not constructed in a day.