Removal of Fuel Subsidy: A Painful Step in the Right Direction

 By Ogiri John Ogiri.

One of the very first attempts to remove subsidies on petroleum products by the federal government was in January, 2012. The then president Good Luck Jonathan-led administration, had announced that the subsidies on petroleum products was no longer in the interest of the common man but that it was a tacit way of subsidizing the rich. Hence, they were removing it outrightly.

As usual, people, both well-intentioned and those driven by selfishness and greed, came out to denounce the president's action which they had interpreted as wicked and anti-people. Within a few days into January that year, protests were organized by many prominent Nigerians so that the government was forced to reverse itself, and as they say, the rest became history as the government suspended the implementation of the fuel subsidy removal policy.

By 2015, when the APC-led administration of former president Muhammadu Buhari came on board, it began to grapple with the reality of the fraud surrounding fuel subsidy as well as its unsustainability. Perhaps, not wanting to draw an instant irk of the people, Mr president with his team began what could be described as a periodic but gradual implementation of fuel subsidy removal and by the time he left office on Monday, the 29th May, 2023, official petroleum price for PMS( Premium Motor Spirit) had already been pegged at NGN194 per litre, while AGO and DPK stood at above NGN700 and over NGN300 respectively per litre.

Perhaps, seeing that the subsidy on petroleum products could no longer be sustainable too, president Bola Ahmed Tinubu's nascent administration decided to announce, in his inaugural speech, an outright removal of the fraud called fuel subsidy. Expectedly, marketers have reacted by refusing to sell or by increasing prices higher and above NGN 200 in many states.

Agreed, removal of fuel subsidy, which seemed to be the only social security benefit available to the people, will impoverish the already poor masses the more as absence of fuel subsidy would create negative macro-economic effects such as the creation of double-digit inflationary trends (and it is already manifesting with the transport sector being the worst-hit) which makes nonsense of the aggregate disposable income of average Nigerians thereby reducing their purchasing power to meet their basic necessities of life. The recent increase in prices of foodstuff as well as transportation fare seemed to have confirmed their apprehensions.Yes, it is understandable too that fuel subsidy removal is capable of provoking social unrests by way of organized protests as well as an increase in the cost of production, but these are only interim consequences. My question; should we demonize the new president's action on account of these consequences? My answer is a capital "No!" What should we do? I think we should support this painful decision with patience for the benefits of removing the fuel subsidy is higher than the cost of doing nothing about it. My reasons are not far-fetched.

In the first place, fuel subsidy removal, for me, is one of the most proactive ways of curbing the menace and the nauseating filth of corruption in the petroleum industry as well as in the country. It has been argued that Nigeria had been subsidizing the rich instead of the poor for whom this subsidy was intended to empower in the first place. In other words, the subsidy which gulps billions of naira every fiscal year has been enriching a cartel or a few individuals thereby hijacking its real benefits from the ordinary Nigerians. What is more disturbing is that, Nigeria has to borrow in order to keep the subsidy going, a trend which is said to be responsible for the continuous increase in the country’s recurrent expenditure over capital spending. Therefore, fuel subsidy must go in order that the Nigerian economy can be salvaged and saved from an imminent collapse.

Another merit of "removing the fuel subsidy is that it would free up resources for other sectors of the economy. The government currently spends a significant portion of its budget on fuel subsidies, which could be better spent on education, healthcare, and infrastructure development. In his 2023 budget proposal, President Buhari proposes N2.557trn supplementary budget for fuel subsidy."

( FRCN, 2023). I cannot agree less!

However, the government should come up with sustainable palliatives to cushion of the adverse effects of removing the fuel subsidy. The following measures should be considered without delay:

1. A comprehensive and sincere review of the current minimum wage of civil servants.

2. Implementation of urban mass transport scheme to help workers move freely and cheaply from an origin to a destination.

Once these palliative measures are put in place and honestly implemented, there will be no need for any kind of negative reactions by the people.

Good bless Nigeria!

©Ogiri John Ogiri.