Petrol To Sell At N980/Litre In Kenya As President Removes Fuel Subsidy

Newly sworn-in Kenyan President, William Ruto, has fulfilled a campaign promise of scrapping fuel subsidy in the country and the decision is generating reactions not just in the East African country, but also in Nigeria where the government is budgeting N6.72trn for subsidy in 2023.

On September 14, after Ruto’s swearing in, Kenya’s Energy & Petroleum Regulatory Authority announced the removal of subsidy.

Prices of fuel have since risen marginally by Ksh20 ($0.17 or N119 converted at N700/USD) to Ksh179 ($1.4 or N980) in the country. The regulator did not tamper with kerosene and diesel subsidies which it said affects the poor directly.

The president is also trying to cut the cost of corn subsidy which costs 7 billion Shillings ($58.1m or N24.91bn converted at N428.81/USD) monthly and focus on subsidising inputs such as fertilizer and quality seeds.

Kenyan government will offer 1.4 million bags of fertilizer to farmers for 3,500 Shillings ($29.07 or N12,465), down by over 3,000 Shillings ($24.92 or N10,685).

The International Monetary Fund had said the country was heading to debt distress with 8.6 trillion Shillings or an equivalent of $71bn public debt in June.

In Nigeria, the news has generated reactions on micro blogging site Twitter.

A Nigerian on Twitter, Moyo Adesibikan, tweeted via @moyosade that, “William Ruto has sharply dropped fuel subsidy, after all the hustler nation campaign, Nigeria don’t sleep on it we are next.”

Another twitter user with the handle @solomonapenja also said “Exactly the same argument many of you pushed in 2012 when PDP did the right thing to remove fuel subsidy.

“You didn’t trust Jonathan to save the money. See where that has landed Nigeria after 10 years. Imagine what the monies wasted on (fuel) subsidy could have done in education, health, infrastructure.”

Nigeria Extractive Industries Transparency Initiative (NEITI) said Nigeria spent N13.7trn or $74.386bn on fuel subsidy between 2005 to 2020.

The Minister of Finance Budget and National Planning, Zainab Ahmed had suggested that the country will be unable to sustainably fund its N19.76trn budget in 2023 except subsidy is expunged by June next year.

In the 2023-2025 Medium Term Expenditure Framework, Nigeria is expected to spend N6.72trn on subsidy out of the N19.76trn ($45.98bn at N428.81/$) budget.

In the budget, the government is hoping to spend over N8.5trn on non-debt recurrent expenditure.

The Minister said “For 2023, the projection is that the average daily truck-out will be 64.96 million barrels per day; that is about 65 million per day, using an average rate at open market rate of N448.20 and then a regulator pump price of N165 per litre. This gives us an average under-recovery, that is the difference between N165 and N448 of N283.2.

“So, just multiply the amount of litre per day, the open market exchange rate of naira to the dollar and then, the gap between the pump price and open market price, the total amount of subsidy per day is N18.397bn.

“So, if you are projecting for the full year, from January to December, it will be N6.715trn. If you are projecting for half a year, it will be 50 per cent of that, N3.375tn. I said earlier in the recommendations that we sent to parliament for consideration on MTEF in half-year, that will be N3.357trn.”