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Fuel Subsidy Regime to End June 2022

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Zainab Ahmed Finance Minister

The Minister of Finance, Budget and National Planning, Zainab Ahmed, has said that the deregulation of petroleum product will take effect from July 2022. She made this known while featuring as a guest on Channels television’s Politics Today on Thursday.

“The Petroleum Industry Act (PIT) has a provision that says that petroleum should be deregulated which means that there should be no subsidy of any petroleum product. So in making our plans, we assume that this deregulation will take effect from the month of July 2002,” the Minister said.

She added that government has made provisions up until June 2022 for the subsidy in the 2022 budget. After June, she hinted that government will no longer subsidise petrol.

This is coming at a time when the economy of the country is terribly in bad shape and majority of Nigerians are struggling to survive.

Over years, due to the economic situation of the country, the government have been taking steps to stop petrol subsidy as it is becoming a heavy burden on the government.

According to a report from Bloomberg, Nigerian government has already spent 904 billion naira on petrol subsidy in the first eight months of 2021. Another report says that Nigeria spent 10 trillion naira on subsidies from 2006-2018. In another recent report by Premium Times, Nigerian government may be spending 102.5 billion monthly on petrol subsidy. The hugeness of these figures is the reason why the government is removing subsidy.

The implication of the removal, therefore, is that Nigeria will now buy petrol for a deregulated price. Even though it is not yet certain the price the product will now go for per litre, it is possible that a litre of petrol will sell a little above 200.

When asked about the shock that such deregulation will introduce to public transport services, small and medium scale businesses in the country, the Minister responded that there were plans on ground.

We are planning to deploy CNG which is an alternative for mass transit to PMS. We are also looking at providing mass transit for the population in terms of transport subsidy for a short period of about six months or maximum of 12 months,” she responded.

Historically, Nigerians are known for resisting subsidy removal attempts. This leaves one to wonder if the planned subsidy removal will or will not be resisted in 2022.

Economy

MSMEs Critical to Nigeria’s Economic Development- President Buhari

President Muhammadu Buhari has said Small and Medium Enterprises (MSMEs) are critical to Nigeria’s economic growth as they contribute about 48 percent to the nation’s Gross Domestic Product.

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MSME

President Muhammadu Buhari has said Small and Medium Enterprises (MSMEs) are critical to Nigeria’s economic growth as they contribute about 48 percent to the nation’s Gross Domestic Product.

President Buhari, who was represented by the Minister of Industry, Trade and Investment, Otunba Richard Adebayo, at the 17th International Trade Fair organised by the Abuja Chamber of Commerce and Industry (ACCI), stated that trade is key to ending poverty and also plays a significant role in the economic growth of any nation.

In his words, “It helps to build wealth and improve foreign reserves. Trade is key to ending poverty across countries, raising standards of living and improving productivity. No economy can thrive without robust trade

“The MSME segment is critical to the stimulation of economic development. Nigeria is estimated to be home to over 40 million MSMEs who, together, contribute about 48 per cent of our GDP. Many of us just see MSMEs as the mamas that fries Akara or the friendly Malam that owns the kiosk on our street.

“That is not the case; some of the fastest growing Fintech start-ups in Africa are in fact MSMEs. This trade fair provides an opportunity to change the narrative of what MSMEs are and demonstrates how innovative they can be.”

“I see enterprises that employ large cross-sections of our youth population. I see enterprises with the capacity to export. I do not see small businesses here, I see future mighty business.”

“The Federal Government is keen to help MSMEs achieve their full potential and has developed strategic policy interventions, enshrined laws and established institutions to create a supportive business environment for entrepreneurs and MSMEs.

“In line with this, the Federal Ministry of Trade and Investment (FMITI) has developed a programme that will enhance access to credit for over 10 million MSMEs at single digit rate.

“Aside from the provision of finance, this project will address key ecosystem issues such as the development of MSME clusters to lower operating costs as well as capacity-building initiatives.

“The Ministry has also commenced the process of adopting a centralised automated platform for the registration of Trademarks, Patents and Designs. The overall objective is to fully digitise existing records and automate the registration process to enable ownership and commercialisation of innovation,” he stated.

It would be recalled that Investors King on October 2, 2022 reported that the federal government has directed the Development Bank of Nigeria (DBN) to step up its efforts to increase its funding for MSMEs.

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Economy

High Interest Rate Will Hurt New Job Creation, Exacerbate Unemployment – Manufacturers Tells FG

The Manufacturers Association of Nigeria (MAN) has said the recently increased interest rate would drag on new job creation and subsequently lead to job loss amid Nigeria’s already worrisome unemployment rate.

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manufacturing-plant

The Manufacturers Association of Nigeria (MAN) has said the recently increased interest rate would drag on new job creation and subsequently lead to job loss amid Nigeria’s already worrisome unemployment rate.

In a statement signed by the Director-General of MAN Segun Ajayi-Kadir, manufacturers disclosed that the increase in the Monetary Policy Rate and the Cash Reserve Ratio portended worrisome negative consequences for the manufacturing sector.

MAN noted that the increase in MPR from 14 percent to 15.5 percent would rub off negatively on other rates and dash the hope for a single-digit lending rate for the productive sector of the economy.

It further said that the recent development would lead to an increase in the cost of borrowing by manufacturers, further beyond the double-digit rate, which would disincentivize new investments in the sector.

The statement read in part, “The observed continuous contractionary monetary policy posture without complementary fiscal support may not effectively reduce the prevailing inflationary pressure on the economy.

“This is not unconnected with the fact that the current increase in consumer price index as reported by NBS is not largely driven by the monetary phenomenon, as self-inflicted weak foreign exchange rate management can be linked to the pressure.”

MAN disclosed that the rate hike would cause increased factor costs which will inflate the price of  products, stating that it was hopeful that the CBN would creatively go beyond the conventional monetary management system because global economic dynamics were changing and conventional measures might no longer be effective.

The statement further read, “It is important that the monetary authority strategically set in motion mechanism for holistic balancing of the real interest rate, which is critical to investment and not just following leading economies to adjust Interest rate without considering domestic peculiarities.”

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Economy

President Buhari to Present N19.76 Trillion 2023 Budget on Friday

Nigerian president, Muhammadu Buhari will present the N19.76 trillion 2023 budget to the joint National Assembly on Friday

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President Muhammadu Buhari - Investors King

Nigerian president, Muhammadu Buhari will present the N19.76 trillion 2023 budget to the joint National Assembly on Friday, according to Senate President Ahmad Lawan.

The Senate President disclosed this on Tuesday in Abuja, saying the presentation would take place at 10:00 am at the temporary chamber of the House of Representatives.

According to the details of the draft presented to the House of Representatives, crude oil was benchmarked at $70 a barrel while oil production was estimated at 1.69 million barrels per day (mbpd) for 2023.

The federal government projected the Naira-Dollar exchange rate at N435.57 despite the black market trading at over N700/US$. Also, it was forecasted that the inflation rate would moderate from the current 20.52% to 17.16% while the nation’s Gross Domestic Product (GDP) was pegged at 3.75%, slightly above 3.55% estimated for 2022.

“Growth is expected to moderate to 3.30% in 2024 before picking up to 3.46% in 2025.

“The inflation rate is projected to average 17.16% in 2023, up from the revised average of 16.11% for 2022.

“Upward pressure on prices is expected to be driven by the current and lag effect of the global price surge due to the Russian-Ukraine war, domestic insecurity, rising costs of imports, exchange rate depreciation, as well as other supply-side constraints.”

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