The Nigerian Finance Minister, Ms Zainab Ahmed, has revealed that the government plans to sustain fuel subsidy till all buffers that will ease the pain of its withdrawal have been established.
This follows the IMF Chief’s observation and advise that Nigeria was better off investing the funds channeled towards subsidizing fuel in key economic sectors like education, health and infrastructure.
“We believe that removing fossil fuel subsidies is the right way to go. If you look at our numbers from 2015, it is no less than about $5.2tn that is spent on fuel subsidies and the consequences thereof,” said Christine Lagarde, the Managing Director of the IMF.
“I would add as a footnote as far as Nigeria is concerned that, with the low revenue mobilisation that exists in the country in terms of tax to GDP, Nigeria is amongst the lowest. A real effort has to be done in order to maintain a good public finance situation for the country and direct investment towards health, education, and infrastructure.”
Although Ms Ahmed agreed initially with the IMF’s observation, she clarified over a news briefing that the government was nowhere near a full removal of subsidy at the moment.
“There is no imminent plan to remove fuel subsidy. We are here to discuss with the global community on various policy issues. One of the issues that always come up in the report, especially the IMF World Economic Outlook report, is how we handle fuel subsidies. So, in principle, the IMF will say fuel subsidies are better removed so that we can use the resources for other important sectors. And in principle, that is a fact to do so.
“But in Nigeria, we don’t have any plan to remove fuel subsidy this time because we have not yet designed buffers that will enable us to remove subsidy and provide cushions for our people. So, there is no plan to remove fuel subsidy. We will be working with various groups to find out what needs to be done if we have to remove the fuel subsidy. What is the alternative? We haven’t yet found viable alternatives. So, we are not at the point of removing fuel subsidy.”
She, however, noted that the removal will be done in phases and would commence once the government has made adequate steps towards putting the right buffers in place.