Nigeria's fuel subsidy may stay beyond June, bonds fall
In the 2023 budget, the subsidy was to end in June, but Ahmed said the Petroleum Industry Act could be amended to allow it to continue during the transition to a new government. "It is not going to be removed now.
(Updates with bond market reaction) ABUJA, April 27 (Reuters) -
Nigeria may extend a fuel subsidy beyond June but the government will work with President-Elect Bola Tinubu's representatives to decide when exactly it will be scrapped, Finance Minister Zainab Ahmed said on Thursday. Nigeria's dollar bond prices fell across the curve after the announcement.
Tinubu, who won the disputed February presidential election, is due to be sworn into office on May 29. He has made ending the petrol subsidy, which cost nearly $10 billion last year, one of his priorities.
Successive governments in Nigeria have tried and failed to remove or cut the subsidy, a politically sensitive issue in the country of 200 million people, where an estimated four in 10 Nigerians live below the national poverty line. In the 2023 budget, the subsidy was to end in June, but Ahmed said the Petroleum Industry Act could be amended to allow it to continue during the transition to a new government.
"It is not going to be removed now. It won't be removed before the transition is completed," Ahmed told reporters. "We are going to work with the representatives of the incoming government to have a clear defined time plan that will take us towards the removal."
Nigeria, Africa's biggest crude producer, imports most of its refined petroleum products but has been trying to revive its moribund refineries. MARKET REACTS
The move upset investors and dollar bond prices fell, with the premium to hold Nigerian debt over U.S. Treasuries widening to 930 basis points from about 910 on Wednesday. A bond maturing in 2033 fell 1.75 cents to 67.125 cents on the dollar, yielding 12.9%.
Jeff Grills, head of emerging markets debt at Aegon Asset Management, had a negative sentiment over the news. "They were going to lose either way. Keep it, and bond holders don't like it. Remove the subsidy, (trigger) unrest, and bond holders still don't like it. Lose-lose."
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