Zainab Ahmed, minister of finance, says the federal government has removed the subsidy on electricity tariff.
She also hinted at government’s plans to remove subsidy on petrol.
Ahmed said this at a virtual meeting of African Finance Ministers and the International Monetary Fund, on Thursday. The theme of the meeting was ‘The political economy of fiscal reforms’.
She said the amendment of the budget was ongoing to accommodate the incremental removal of petrol subsidy, adding that the government had to carefully adjust the prices incrementally at some levels.
“We are cleaning up our subsidies. We had a setback; we were to remove fuel subsidy by July this year but there was a lot of pushback from the polity. We have elections coming and because of the hardship that companies and citizens went through during the COVID-19 pandemic, we just felt that the time was not right, so we pulled back on that,” Ahmed said.
“But we have been able to quietly implement subsidy removal in the electricity sector and as we speak, we don’t have subsidies in the electricity sector. We did that incrementally over time by carefully adjusting the prices at some levels while holding the lower levels down.”
Subsidy removal has been hotly debated across the country. Energy experts say it is hurting the economy.
Petrol subsidy payments gulped N1.43 trillion in 2021, shrinking revenue accrued to the federation account to N542 billion.
According to an analysis by TheCable Index, the NNPC had been deducting from oil revenue to fund the unpriced sales of petrol to Nigerians, affecting revenue projections for the three tiers of government and developmental projects.
Financial experts said the removal of electricity subsidy would attract more investments into the sector and help government save scarce resources.
At the event, Ahmed said petrol subsidy remained a huge problem for the government as it had thrown up deficits more than what was planned.
She said the rise in global oil prices would worsen the issue “but the current review that we are doing is to hold the subsidy at the level in which it is planned”.
“We are currently doing a budget amendment to accommodate incremental subsidy (removal) as a result of the reversal of the decision and we want to cap it at that,” Ahmed said.
“Hopefully, the parliament will agree with us and we are able to continue with our plan for subsidy (removal) otherwise the way things are going we will not be able to predict where the deficit will be as a result of the fluctuation in the global market.”
She added that the government was improving on tax administration and compliance by adopting technology so as to increase revenue.
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