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Fuel Subsidy Removal Will Reduce Fiscal Burden by 8%



  • Fuel Subsidy Removal Will Reduce Fiscal Burden by 8%

As the debate over fuel subsidy removal rages on, the latest economic bulletin of Financial Derivatives Limited has revealed that the country’s fiscal burden will reduce by eight per cent if it stops subsidising petrol.

The federal government had Thursday said it was yet to devise a workable formula for the removal of fuel subsidy.

Minister of Finance, Mrs. Zainab Ahmed, who said this, added that the removal of subsidy would have negative effect on vulnerable Nigerians.

She said this few days after the International Monetary Fund (IMF) had advised Nigeria to remove fuel subsidy and channel the funds spent on subsidy to the health and education sectors.

The Minister of State for Petroleum, Dr. Ibe Kachikwu, recently disclosed that the landing cost of petrol was N180 per litre and the amount spent on subsidy daily was put at N1.86 billion.

But the Lagos-based financial advisory and investment firm in the report stressed that although subsidy removal was not without its costs, the potential benefit far outweighs its cost.

It stated that subsidy savings could be utilised in the provision of essential social needs such as access to free education and quality healthcare services.

These services, according to the report, are crucial to the improvement of living standard and the quality of life of the average Nigerian.

It stated: “More importantly is the reduction in the fiscal burden by at least eight per cent. Economic prudence, which emphasises the need to be discerning and forward-looking, has been the clamour for pro-subsidy advocates like the IMF.

“The fund is now sounding like a broken record on the call for the removal of subsidies. In the last three decades, it has become a vicious cycle – IMF recommendation on subsidy removal, followed by fuel queues, adjustment and in some cases the IMF is ignored and then intended and unintended consequences that follow.”

Nevertheless, while it reiterated that subsidy was not disdained in itself, it noted that its abuse and inefficient administration of the incentive, “has made it a fraud that must be checked.”

The Petroleum Products Pricing Regulatory Agency (PPPRA) had disclosed that Nigeria’s daily consumption increased by two million litres to 56 million litres in 2019.

This was a 22 per cent surge over 2017 daily consumption of 46 million litres.
This increase, according to the report, was largely not in line with “our consumption pattern during the time.”

“There has been a drastic decline in the importation of new cars over the period due to high import duties and levies. “Similarly, the increased traction of diesel engine vehicles and other modes of transportation such as air, water and rail, also do not support the supposed rapid growth in daily fuel consumption.

“Another bane of fuel subsidy is the arbitrage and smuggling opportunities across national borders. This means the Nigerian government is indirectly subsidising the petrol consumption of some neighbouring countries and it could justify the increase in consumption over the last three years,” it added.

Furthermore, the report noted that the impending expenditure cut from the removal of fuel subsidies would free up resources to embark on other social safety nets. But, it pointed out that the fact that there are no guarantees that these savings would be used to improve the quality of life of the economically vulnerable affects the case for subsidy removal.

“Reduction of other subsidies will aid fiscal consolidation. Fuel subsidy is not the only item that needs to be priced efficiently.

“The government also needs to allow for efficient resource allocation in the power sector and foreign exchange market. “Resource allocation through the interplay of market forces (demand and supply) limits market distortions. The adoption of cost reflective electricity tariffs will help address the power sector’s liquidity issues, improve the capacity of players across the power value chain and eventually output.

“Similarly, the gradual convergence of exchange rates will also ease pressure on external reserves, improve transparency and bolster confidence in the forex market.

“The reality is that petrol subsidies are being abused and ripping off the people who are the victims of inefficiency and fraud.

“Therefore, it is necessary to change the template and tie it to parameters – mainly the price of crude oil, the exchange rate and other costs metrics,” it added.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq,, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Computer Village Traders Demand Refunds as Lagos State Cancels Katangowa Project



Traders at the renowned Computer Village in Lagos find themselves in a state of uncertainty following the abrupt termination of the multibillion-naira Katangowa project by the Lagos State Government.

The project, which was aimed at relocating the bustling tech market from its current site in Ikeja to the Agbado/Oke-Odo area of the state, has left traders in a state of limbo.

Despite the cancellation of the project reportedly occurring two years ago, traders claim they were not informed by either the government or the developers, Bridgeways Limited.

This lack of communication has left them in a precarious position, particularly concerning the substantial upfront payments made by some traders to the developers.

Chairman of the Computer Village Market Board, Chief Adebowale Soyebo, expressed dismay at the lack of communication from the authorities regarding the project’s termination.

He explained that neither the government nor the contractors had officially informed them of the decision, leaving traders in the dark about the fate of their investments.

Traders who had made payments to Bridgeways Limited now seek clarity on the refund process. The absence of official communication has compounded their concerns, with many uncertain about the fate of their investments.

While acknowledging the payments made by traders, Lagos State Governor’s Adviser on e-GIS and Urban Development, Dr. Olajide Babatunde, assured that the government would facilitate refunds.

He, however, said there is a need for proper identification and verification to ensure that affected traders receive their refunds accordingly.

The termination of the Katangowa project has reignited debates about the relocation of Computer Village.

Traders assert that the issue of relocation should not be raised until the new site is at least 70% completed, as per their agreement with the government.

The cancellation of the Katangowa project underscores the challenges associated with large-scale urban development projects and the importance of transparent communication between stakeholders to avoid such situations in the future.

As traders await further directives from the government, they remain hopeful for a resolution that safeguards their interests and ensures the continuity of one of Nigeria’s most prominent tech markets.

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Government Begins Disbursement of N200bn Support Fund to Manufacturers and Businesses



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The Ministry of Industry, Trade and Investment has initiated the disbursement of the long-awaited N200 billion Presidential Conditional Grant Scheme.

This is the beginning of a vital phase in the government’s strategy to provide financial assistance to manufacturers and businesses across Nigeria.

The scheme, which is being administered through the Bank of Industry (BOI), has been divided into three categories of funding, totaling N200 billion.

The disbursement process comes after an exhaustive selection process and verification of applicants to ensure transparency and accountability in the allocation of funds.

Doris Aniete, spokesperson for the Ministry of Industry, Trade and Investment, announced the progress in a statement posted on the trade minister’s official X (formerly Twitter) handle.

Aniete highlighted that verified beneficiaries have already started receiving their grants, signaling the beginning of the phased disbursement strategy.

“We are pleased to inform you that the disbursement process for the Presidential Conditional Grant Programme has officially commenced. Some beneficiaries have already received their grants, marking the beginning of our phased disbursement strategy,” stated Aniete.

She further disclosed that by Friday, April 19, a substantial number of verified applicants are set to receive significant disbursements.

However, Aniete emphasized that disbursements are ongoing, and not all applicants will receive their grants immediately, assuring that all verified applicants will eventually receive their grants in subsequent phases.

The initiation of the disbursement process comes after more than eight months since President Bola Tinubu announced the grant for manufacturers and small businesses.

The scheme aims to mitigate the adverse effects of recent economic reforms and foster sustainable economic growth by empowering businesses with financial support.

President Tinubu had outlined the government’s commitment to strengthening the manufacturing sector and creating job opportunities through the disbursement of N200 billion over a specified period.

The funding is intended to provide credit to 75 enterprises, each able to access up to N1 billion at a low-interest rate of 9% per annum.

However, the implementation of the programme has faced challenges, including delays and criticisms regarding the registration process.

Femi Egbesola, President of the Association of Small Business Owners, expressed concerns over the slow pace of data collation and suggested that genuine businesses were being discouraged from accessing the loans.

Despite the hurdles, the commencement of the disbursement process signifies a significant step forward in the government’s efforts to provide vital support to manufacturers and businesses, potentially revitalizing economic activities and driving growth across various sectors.

As beneficiaries begin to receive their grants, the impact of this initiative on the nation’s economic landscape is eagerly anticipated.

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Company News

MicroStrategy Rally Crushes Short Sellers, Wiping Out $1.92 Billion



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Short sellers betting against MicroStrategy found themselves facing significant losses as the company’s rally wiped out $1.92 billion since March.

This development comes amidst a rally that has seen MicroStrategy’s stock outperform bitcoin, causing a considerable hit to those who had taken a bearish stance on the tech firm.

According to data from S3 Partners, short sellers have been on the losing end since March, as MicroStrategy’s stock surged, highlighting the impact of the rally on those betting against the company’s success.

This loss underscores the challenges faced by short sellers in a market where certain stocks experience rapid and unexpected price increases.

The rally in MicroStrategy’s stock is attributed to several factors, including the approval of several spot bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC) earlier in the year.

This move by the SEC brought bitcoin, a once-nascent asset class, closer to the mainstream and fueled investor interest in companies like MicroStrategy, known for their significant holdings of the cryptocurrency.

MicroStrategy, which held nearly 190,000 bitcoin on its balance sheet as of the end of 2023, has indicated its intention to continue increasing its exposure to the digital currency.

The company’s decision to sell convertible debt to raise money for additional bitcoin purchases further bolstered investor confidence and contributed to the stock’s rally.

Analysts at BTIG noted that the premium for MicroStrategy’s stock reflects investors’ desire to gain exposure to bitcoin indirectly, especially those who may not have the means to invest directly in the cryptocurrency or ETFs.

The company’s ability to raise capital for bitcoin purchases is seen as a positive sign for shareholders, adding to the optimism surrounding its stock.

However, despite the recent rally and optimism surrounding MicroStrategy, the crypto industry as a whole continues to be heavily shorted.

Short interest in nine of the most-watched companies in the crypto space remains high, standing at 16.73% of the total number of outstanding shares, more than three times the average in the United States.

Moreover, concerns persist regarding the SEC’s stance on cryptocurrencies, with some experts suggesting that the approval of spot bitcoin ETFs may not necessarily indicate a broader acceptance of other similar products, such as spot ethereum ETFs.

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