The Federal Government’s decision to phase out subsidy on petroleum products beginning in June 2023, under the incoming administration, has elicited uncomfortable reactions from some Nigerians. The federal government, at the beginning of this year, had announced that it would stop the payment of fuel subsidy by the middle of the year, thereby putting an
The Federal Government’s decision to phase out subsidy on petroleum products beginning in June 2023, under the incoming administration, has elicited uncomfortable reactions from some Nigerians.
The federal government, at the beginning of this year, had announced that it would stop the payment of fuel subsidy by the middle of the year, thereby putting an end to a regime of several years of regulation characterised by monumental corruption in the Petroleum industry.
In preparation for the removal of fuel subsidies, the federal government recently announced that it has obtained a loan of $800 million from the World Bank as a palliative for the post-fuel subsidy removal relief program to alleviate the challenges that citizens may face.
Furthermore, Mrs Zainab Ahmed, the minister of finance, budget, and national planning, stated that the outgoing administration will work with the incoming administration to distribute funds to the vulnerable 50 million Nigerians identified to mitigate the impact of the subsidy removal. The breakdown of funds, however, reveals that each person will only receive N7360 as a relief fund.
Given the timing of the subsidy removal, it is possible that the first assignment of the incoming administration of Bola Ahmed Tinubu will be to decide whether to subsidize petroleum products in the country or not. Though, he vowed repeatedly throughout his campaign that if elected president of Nigeria, he would end the regime of fuel subsidy.
However, there are mixed reactions from Nigerians on the subsidy removal as some of the people who spoke with NDR in random interviews expressed their views on the development.
A social commentator, Mr Kazeem Olalekan Israel decried the lack of management of oil price in the country and the moribund condition of the refineries to which the government has failed to pay attention. He opined that the solution to Nigeria’s challenges in the oil and gas sector is to revamp the local refineries to stabilise petroleum production in the country. He also urged the government to improve its investment by building more refineries.
“Meanwhile, even when the price of crude oil stabilises for a long period, it will not automatically translate to stability in the local price because we rely solely on the importation of refined oil as the only means to meet up with our daily domestic consumption of petroleum products. Right now, the practical way forward to the petrol crisis in Nigeria is definitely not by putting an end to the subsidy regime. Doing such will only expose petrol and kerosene prices to the vagaries of the world oil market. The remedy is revamping existing refineries and building new ones to encourage local production of petroleum products”, he said.
Speaking about the stance of the president-elect to remove the fuel subsidy, Mr Olalekan said his decision is hypocritical and will likely be met with resistance from Nigerians. He advised the incoming administration to consider a public-private partnership scheme instead of subsidy removal.
“Practically, it will amount to hypocrisy and double-standard for the Tinubu’s administration to remove the subsidy on fuel because he also joined in the January uprising against fuel subsidy removal which forced the then Jonathan’s administration to beat subsidy removal a bit from full implementation to combining subsidies with palliatives (SURE-P) and some deregulation. The new administration should rather channel its energy towards revamping the already-existing ones or even selling them and strengthening the Public-Private Partnership in the area of refining oil”
Owoboye Labi, an academic, on the other hand, registered his support for the removal of the fuel subsidy, pointing to the lack of accountability and transparency which have overwhelmed the oil and gas sector. He added that the money spent on subsidising petroleum products can be used to provide social amenities for citizens. “The best thing is to remove it considering the amount of unaccounted money spent on it. The money can be used for another developmental project like an education loan.
“People will definitely react if it’s removed by the new administration, but the noise will be silenced by the introduction of education loans and other pro-people policies that will be introduced. As it is, Nigeria cannot afford to continue with subsidy”.
Ayobami Adewale an entrepreneur who runs his saloon, told NDR that the removal of the fuel subsidy should be implemented, stating that the subsidy has been attached to fraudulent practices in the oil and gas sector. He stated that since subsidy has not solved the challenge of fuel scarcity in the country, the government should be removed.
“I am an advocate of the removal of fuel subsidy because Nigeria is the only country in the world that is not refining our crude oil ourselves, compare to all other countries that formed OPEC. That has pushed us to the stage where we are now to think that we need fuel subsidy; we do not need it and I think it is time to call a speck a speck, we need to face the fact.
“You are kind of hiding behind the fact that we want everything free. If we truly want changes we have to be able to face our fears and left to me I’m in support of it as subsidy to me is a scam. I don’t understand the fear of some Nigerians who are worried that if we removed subsidy; how are we going to cope?
Rejoice Chidebe said the removal of subsidy is going to crumble small businesses across the country. According to her, the increment in the price of fuel will frustrate transportation, which has an influence on other sectors in the country. As a small-scale business owner, she appealed to the government to find another way to make business easier for the masses.
But, reacting to the palliative programme set up by the federal government, Aderemi Ojekunle, a financial and media expert acknowledged the intention of the federal government to create a relief strategy for Nigerians. He, however, noted that such a programme should provide a more direct measure to tackle the economic challenges instead of its original plan.
He further advocated for the gradual removal of the subsidy, encouraging the Federal Government to focus on creating basic amenities for the citizens in the process to ameliorate the hardship subsidy removal could bring to Nigerians.
“From my understanding, the palliative has been in place as part of Buhari’s arguably social investment programme. Extending such with another fund from the World Bank in a post-subsidy removal era is another matter. When you remove subsidy, there’s the need for measures to cushion the effect on vulnerable citizens and that’s why some have argued for a gradual removal.
“Vulnerable citizens would need some kind of phase-out measures to adjust to total subsidy removal. The social investment programme is a going policy of the Buhari government and extending to the post-subsidy removal era is a welcome idea but not in total a good measure to ameliorate current economic challenges. One would expect a measure that would have a direct impact on increasing food prices and transportation costs.
“If we spent billions to cater for shortfalls in petrol prices in 2022, I would expect the government to use the same billions on social economic developments. Invest in education, the health sector, roads and efficient power supply and there would be less impact of subsidy removal on the masses.”, he said.
The National Coordinator of the Education Rights Campaign and a Labour Activist, Hassan Soweto, on the other hand, described government’s decision to remove fuel subsidies at this time a suspicious act. He stated that removing subsidies without making provisions for the refinery is a misallocation of resources. He stated further that the palliative program proposed by the government is insufficient to meet the needs of Nigerians, and the relief program will be futile.
He urged the government, to return ownership of the oil and gas sector to the people in a democratic manner, arguing that this is the only way Nigerians can overcome the sector’s corrupt practices. He went on to say that until that is done, there will be no relief program to alleviate the country’s hardship.
He also mentioned the country’s debt as a major challenge, saying that the government should refrain from taking loans for frivolous purposes, noting that Nigeria’s debt threshold is overwhelming and that the cost of debt service is nearly equal to the country’s revenue. The entire idea of fuel subsidy is a fraudulent project that is not going to ease the resolution of the oil and gas sector, neither is it going to resolve the corruption going on in the sector.
“Removal of fuel subsidy is only going to lead us to the era of hike in the price of fuel because Nigeria is going to start importing and operating the at the international rate as petroleum business is based on the rate of dollars across the world. The trade union in the oil and gas sector has said people will have to pay more like N400 per litre. This will create an increase in the prices of other things, inflation will set in and the cost of basic things will skyrocket.
“If you look at the background, you will know that the relief the federal government is creating does not amount to anything, look at the numbers of people with cars, people who are using the fuel, it is only going to create another era of total regression in the country. So the subsidy removal is dishonest and anti-poor.
In the same light, the Nigeria Labour Congress has objected to the plan to remove fuel subsidy when the country’s refineries are not functional, with the indication that such action is not thoughtful. The NLC warned the Federal Government that the removal of the Fuel subsidy can set the country on fire, urging the government to find a lasting solution to Nigeria’s refineries which have become moribund before raising a conversation about subsidy removal.