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Economy

IMF Urges Nigeria to End Fuel and Electricity Subsidies

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5 months ago

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IMF global - Investors King

In a recent report titled “Nigeria: 2024 Article IV Consultation,” the International Monetary Fund (IMF) has advised the Nigerian government to terminate all forms of fuel and electricity subsidies, arguing that they predominantly benefit the wealthy rather than the intended vulnerable population.

The IMF’s recommendation comes amidst Nigeria’s struggle with record-high inflation and economic challenges exacerbated by the COVID-19 pandemic.

The report highlights the inefficiency and ineffectiveness of subsidies, noting that they are costly and poorly targeted.

According to the IMF, higher-income groups tend to benefit more from these subsidies, resulting in a misallocation of resources. With pump prices and electricity tariffs currently below cost-recovery levels, subsidy costs are projected to increase significantly, reaching up to three percent of the gross domestic product (GDP) in 2024.

The IMF suggests that once Nigeria’s social protection schemes are enhanced and inflation is brought under control, subsidies should be phased out.

The government’s social intervention scheme, developed with support from the World Bank, aims to provide targeted support to vulnerable households, potentially benefiting around 15 million households or 60 million Nigerians.

However, concerns persist regarding the removal of subsidies, particularly in light of the recent announcement of an increase in electricity tariffs by the Nigerian Electricity Regulatory Commission (NERC).

While the government has taken steps to reduce subsidies, including the removal of the costly petrol subsidy, there are lingering challenges in fully implementing these reforms.

Nigeria’s fiscal deficit is projected to be higher than anticipated, according to the IMF staff’s analysis.

The persistence of fuel and electricity subsidies is expected to contribute to this fiscal imbalance, along with lower oil and gas revenue projections and higher interest costs.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Economy

FG Moves to Reduce Transportation Fares by 40%, Says CNG is Great Alternative to Petrol Crisis 

Published

5 hours ago

on

September 28, 2024

By

ABC Transport Plc

If commercial transporters across Nigeria can buy into the Compressed Natural Gas, the Federal Government has said the hike in transportation fares will be drastically reduced.

According to the Programme Director of the Presidential Compressed Natural Gas Initiative, Michael Oluwagbemi, the Federal Government hopes there will be over 40 per cent reduction in transportation fares through adopting CNG for commercial vehicles.

Speaking during a Memorandum of Understanding signing ceremony held in Abuja on Friday, where key stakeholders, including the National Union of Road Transport Workers from Itakpe, Adavi and Ajaokuta train station units gathered to formalise the agreement, Oluwagbemi emphasised the government’s commitment to affordable transportation amidst rising fuel costs.

Explaining how President Bola Tinubu led administration plans to tackle hike in transportation fare, Oluwagbemi said the Federal Government is working hard to bring transportation prices down, especially during these challenging times.

Describing CNG introduced by the president as a great alternative to the petrol problem, he said under the new plan, fares for six eight-passenger ger vehicles will be slashed from N12,000 to N7,,000 while fares for four-passenger ger vehicles will drop from N13,000 to N8,000 from Abuja to Ajaokuta train station.

According to him, the trip from Itakpe Station to Warri costs N5,000, showcasing the benefits of the Federal Government’s infrastructure investments over the past five years.

He said the progress represents a significant savings of over 40%, adding that passengers travelling from Abuja to Ajaokuta Station will greatly benefit from Tinubu’s intervention.

The Director of the CNG initiative noted that it is designed to encourage the conversion of existing commercial vehicles to CNG, which is sold at a discount of up to 60 per cent compared to petrol prices.

Oluwagbemi stated that the converted vehicles will operate at a significant discount, remain flexible, and run cleaner, cheaper, safer, and more reliably.

A total of ten CNG fuel conversion centres have already been established across Abuja, Itakpe, and Ajaokuta, including six NNPC stations and two NIPCO stations.

More stations are in the pipeline, with collaborations with Bovas to introduce additional facilities in Abuja.

The timeline for implementation is ambitious, with inspections of vehicles expected to conclude next week and conversions commencing shortly thereafter.

At the event, the Secretary of the NURTW’s Ajaokuta unit, Adeyemo Teslim, expressed gratitude for the collaboration.

Teslim revealed that joining forces will yield multifaceted benefits, which Nigerian transporters are eager to support.

The transporter highlighted the need for expanded coverage to enhance accessibility across various regions, adding that the agreement also includes an enforcement mechanism to ensure compliance with the new fare structure.

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Economy

FG Awards N158bn Lekki Port Service Lanes Construction to Dangote 

Published

4 days ago

on

September 24, 2024

By

lekki

The Federal Government of Nigeria has awarded the construction of service lanes connecting the Lekki Deep Sea Port through Epe to the Shagamu-Benin Expressway to the Dangote Group, one of the leading private sector giants in the country.

The approval for the construction of the project was made at the Federal Executive Council (FEC) meeting presided over by President Bola Tinubu.

Investors King learned that the project which seeks to reduce traffic congestion within Lagos, particularly with the concentration of industries in the Lekki Free Trade Zone, is worth N158 billion.

A statement issued by Bayo Onanuga, Special Adviser to President Tinubu on Information and Strategy disclosed that the project will be handled by Dangote Industries under the Federal Government’s Road Infrastructure Development Fund and Refurbishment Investment Tax Credit Scheme.

Aside from tackling traffic challenges, the planned service lanes are expected to facilitate hitch-free movement of goods, easing pressure on Lagos’ internal road networks and improving connectivity to other regions.

The Dangote Group benefits from reduced tax liabilities by carrying out public projects that contribute to national development.

Under the Federal Government’s Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme, companies like Dangote Industries can receive tax credits in exchange for funding and completing public infrastructure projects, allowing them to “pay” for the project through future tax deductions.

As of August 2024, nine major road projects across the country were being funded by Dangote Group under this scheme, according to a review by the Ministry of Works.

With the recent FEC approval of the construction of service lanes from the Lekki Deep Sea Port through Epe to the Shagamu-Benin Expressway, the number of road projects being handled by Dangote Group has now risen to ten, making it the top private sector player in the scheme.

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Economy

Dangote Advocates for Full Subsidy Removal, Says Refinery Will Tackle Consumption Challenges

Published

4 days ago

on

September 24, 2024

By

Aliko Dangote - Investors King

The founder and Chief Executive of Dangote Group, Alhaji Aliko Dangote, has urged the President Bola Tinubu-led government to place its trust in the Dangote Refinery.

In a 26-minute interview with Bloomberg Television in New York on Monday, Dangote stated that the refinery would address many of Nigeria’s issues, particularly the high consumption rates that have turned the nation into an importer of most goods.

However, the businessman also called on the Federal Government to fully eliminate fuel subsidies.

According to him, now is the right time to remove fuel subsidies so that the country can determine its actual petrol consumption.

He said, “Subsidy is a very sensitive issue. Once you are subsidizing something, people will inflate the price, and the government will end up paying more than they should. It is the right time to get rid of subsidies.”

He added, “This refinery will resolve a lot of issues. It will provide clarity on Nigeria’s real consumption because, right now, no one can give a definite figure. Some say 60 million litres of gasoline per day, while others say less. But once we start producing, everything will be measurable.

“Everything will be accounted for, especially with the trucks and ships loading from us. We will track them to ensure the oil stays within Nigeria, which I believe will help the government save a significant amount of money. Now is the right time to remove the subsidy.”

Dangote further revealed that the responsibility for removing subsidies rests solely with the government.

He continued, “We have the option of either producing and exporting or selling locally. As a large private company, we do need to make a profit. We have built something worth $20bn, so, of course, we have to generate revenue.

“The removal of subsidies is entirely up to the government, not us. We cannot adjust the price, but I think the government will have to compromise on certain things. In the end, the subsidy will have to be removed.”

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