Holistic, phased approach needed for petrol subsidy removal, says Yemi Kale

Oyeyemi Kale, partner and chief economist of KPMG Nigeria, says a holistic and well-phased approach is needed for petrol subsidy removal.

The former statistician-general of the federation spoke on Monday when he appeared on an Arise TV programme monitored by TheCable.

The federal government has projected to spend N3.35 trillion on petrol subsidy this year.

Zainab Ahmed, minister of finance, budget and national planning, had said the federal government may begin the gradual removal of the petrol subsidy from April 2023.

Asked whether he supports the deregulation of petrol price, Kale said petrol subsidy removal has significant economic and social implications. 

However, maintaining the subsidy has significant economic, social, and environmental costs.

“I do not like to look at these things by focusing on all the positives, like those that want to remove subsidies will ignore and play down the negatives, or those that do not want subsidies removed will focus on the negatives,” Kale said.

“I prefer the holistic approach. Look at the entire system and then, determine what is overall best for the country because any policy, including this one, will have positives and negatives. Somebody will benefit and other people will lose out from the policy.”

Kale added that it is a cost-benefit analysis that ultimately determines what is best for the economy.

He said conversations must take place to determine how the government will provide palliatives for affected citizens to minimise the negative effects of the policy.

“The country is getting to a point — if we are not really there — where the conversation will be subsidy has to be reviewed because we just cannot pay for it any longer,” he said.

“I would prefer that before we get there, we can actually discuss this, so that the process of removing subsidy is well communicated and maybe in a well-phased approach.

“The truth of the entire thing is you and I benefit more from the subsidy than the poor that we like to say we are thinking about. 

“This is because your consumption of fuel from going from point A to B in your car (by yourself) is a lot higher than a poor man in a taxi with five people or in a bus with 20 people going from point A to point B.

“His consumption per capita is also less. That is not saying that the impact is not going to be more on him. When you have a subsidy regime that in 6 months in 2023 is higher than your budget for health or education and infrastructure combined, then you have to ask yourself if that is the way.”