The International Monetary Fund (IMF) has said the Nigerian government has, through the backdoor, resumed the payment of subsidies on the premium motor spirit (PMS), otherwise known as petrol.
On May 29, 2023, during his inauguration speech, President Bola Ahmed Tinubu announced an end to the petrol subsidy, triggering a hike in the prices of goods and services in the country.
A few weeks later, the Central Bank of Nigeria (CBN) collapsed the different exchange rate regimes into one, with the value of the Naira to the Dollar weakening.
On Tuesday, the Naira depreciated to N1,510 per dollar in the parallel market from N1,485 per dollar on Monday.
However, the naira on Tuesday appreciated to N1499.07 per dollar in the Nigerian Foreign Exchange Market (NAFEM).
Over the weekend, the IMF issued a statement on the conclusion of its Executive Board’s Post Financing Assessment with Nigeria and it expressed concerns that the government had capped the prices of fuel at retail stations.
The global lender advised the administration of Mr Tinubu to completely stop the payment of subsidies on petrol to free funds to run the government.
In the past few days, there have been reports of queues returning to petrol stations in major cities in the country, but the Nigerian National Petroleum Company (NNPC) Limited have allayed the fears of consumers, assuring that it has enough to go around.
After the removal of the petrol subsidy in May 2023, the pump price changed from N185 per litre to N40 per litre and then to N568 per litre at NNPC fuelling stations, while others currently sell above N600.
The government had said the prices would fluctuate after subsidy removal from time to time but the pump price has remained steady despite the prices of crude oil in the global market going up and down.
In the statement, the IMF said the government has “capped retail fuel and electricity prices” ostensibly to “ease the impact of rapidly rising inflation on living conditions,” “thus partially reversing the fuel subsidy removal.”
However, it noted that, “Fuel and electricity subsidies are costly, do not reach those that most need government support and should be phased out completely.”
The bank commended the government’s focus on revenue mobilization and digitalisation, saying this will improve public service delivery, safeguard fiscal sustainability and eliminate the need for CBN financing through ways and means, which have grown above N20 trillion.