Nigeria may have reached stage where petrol subsidy payment might be unaffordable – Dr. Kale, Chief Economist KPMG

Oredola Adeola

Dr Yemi Kale,  Chief Economist & Head Research, KPMG Nigeria has projected that Nigeria may have reached or will soon reach a stage where payment of petrol subsidy might be unaffordable.

The former Statistician-General, Nigerian Bureau of Statistics(NBS) made this known while speaking on the topic: “The Nigerian Economy: A Look Ahead in 2023”, during an interview session with ARISE News, monitored by EnergyDay on  Monday.

Dr Kale said, “We need to be honest with ourselves. I think we are getting to a point – if we are not there already – that the conversation will not even be about ‘if we should remove petrol subsidy or not’. It will be ‘Subsidy has to be removed because we just can’t pay for it anymore.’”

“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 KPMG’s Chief Economist noted that the people in the middle and upper classes benefit more from the petrol subsidy than the poor that are projected to be affected by the removal.

This, according to him, is because the rich people consume more petrol from moving from point A to B with their cars, which is a lot higher than the lower class moving from point A to B, in a commercial vehicle with five other passengers or a bus with more than 20 passengers.

Dr. Kale said, “Consumption per capita in such a case is often less compared with that of the rich. That is not to say 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

He further emphasised that the Nigerian Government must consider the advantages and disadvantages of keeping the petrol subsidy in check, adding that this would help the government determine what is best for Nigeria.

Kale also noted that retaining the subsidy would incur major costs on both economic and social levels, as well as a plan to completely remove it.

He said, “Government must be holistic in its approach. Look at the entire system and then, determine what is overall best for the country because any policy”

According to Dr Kale, the government should identify ways to compensate individuals who might be on the losing end if subsidies are eliminated in order to restore balance for the benefit of the country.

He said, “Average Nigerian, whom it was originally intended to protect, would certainly bear a greater burden of its expense.

The KPMG Chief Economist however revealed that somebody will definitely benefit while another category of people will lose out from the policy, adding that it is a cost-benefit analysis that ultimately determines what is best for the economy.