Egypt dumps fuel subsidy. Should Nigeria follow suit?

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Egypt has finally exited from fuel subsidy regime with its latest push, raising domestic prices by between 16 percent and 30 percent to bring them into line with their real cost, as it nears the end of an IMF-backed economic reform programme. The reform had led to a boost in investment in the oil and gas sector especially through foreign direct investment.

The price of petrol rose by 18.5 percent to $0.48 a litre, and diesel rose by 22.7 percent to $0.41 per litre. The price of cooking gas cylinders rose by 30 percent to $3.90 for domestic use and $7.80 for commercial use.

Scaling back fuel subsidies that have been a strain on the budget for decades was a key plank of a 3-year, $12 billion reform package signed with the International Monetary Fund in 2016, as Egypt’s economy struggled to recover from the turmoil that followed its 2011 uprising.

Most fuel prices are now in line with their costs, though the government is still subsidising fuel for bakeries and power generation, a petroleum ministry official said. But the changes will push up prices for transport, food products and other goods.

Energy subsidies had eaten up as much as 20 percent of the government’s budget in recent years. Analysts had speculated that government would wait until after the end of the African Cup of Nations – the continental soccer championships, which Egypt is hosting until July 19, before announcing the price rises.

The quest to wean Egypt from petroleum products’ subsidy started in 2016, a journey successive administrations in Nigeria have been too scared to try or when they do, it is done reluctantly.

Nigeria’s fuel subsidy has spiraled out of control. The subsidy costs have grown sharply from a daily average cost of N774m … Read More...

South Africa send host nation Egypt out of AFCON

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Against all odds, lowly-rated and less fancied South Africa dumped Mohamed Salah’s Egypt out of the Africa Cup of Nations (AFCON)  and setting up an interesting quarter-finals fixture with Nigeria’s Super Eagles on Wednesday.

South Africa hit Egypt on the counter-attack as Thembinkosi Lorch calmly slotted into the corner.

The hosts’ best chance fell to Mahmoud Trezeguet, but he could only fire his shot straight at Ronwen Williams.

 

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Anthony Nlebem

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AFCON 2019: South Africa stun Egypt to play Nigeria in quarter-finals

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Against all odds, lowly-rated and less fancied South Africa dumped Mohamed Salah’s Egypt out of the Africa Cup of Nations (AFCON)  and setting up an interesting quarter-finals fixture with Nigeria’s Super Eagles on Wednesday.

South Africa hit Egypt on the counter-attack as Thembinkosi Lorch calmly slotted into the corner.

The hosts’ best chance fell to Mahmoud Trezeguet, but he could only fire his shot straight at Ronwen Williams.

 

Details layer….

 

Anthony Nlebem

Source link Read More...

Egypt Slashes Fuel Subsidies as Nigeria dithers

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Egypt has slashed fuel subsidies as part of an economic overhaul backed by the International Monetary Fund and the move will ease pressure on public finances in an economy struggling with double-digit inflation. 

However, Nigeria which has an even bigger financing challenge is holding on to crushing subsidy regime which eats up as much a trillion a year.

The decision by the Egyptian government, effective July 5, raises the price of diesel, which is used by trucks, buses and other motorists by 22.7%.

The price of higher-grade 95 and 92 octane gasoline rose by 16% and 18.5%, according to a statement from the oil ministry. Lower-grade 80 octane gasoline went up by 22.7%.

The hikes are the latest effort by the Arab world’s most populous nation to curb government spending and cut the deficit. Egypt devalued the pound in 2016.

The currency halved in value against the U.S. dollar, driving inflation to levels well above 30% before the pace of price increases began to cool.

The central bank has cut the benchmark interest rate only once in the past year, and is unlikely to act again until it can judge the inflationary impact of the latest fuel-price hikes.

Subsidies are the life-blood of many Egyptians, but eat up almost a third of the government’s budget.

Any effort to reform the food subsidy system is fraught with political dangers in a country where tens of millions rely on state-subsidized bread, so authorities have focused instead on electricity and fuel. 

The government said last month that electricity prices would rise by almost 15% in the fiscal year that begins July 1, saving almost $1 billion.

The next step in the fuel subsidy reform plan is an indexation mechanism that links local fuel prices to international ones.

Subsidies on … Read More...