Petroleum subsidy is a federal government intervention aimed at providing direct financial assistance to oil marketing companies and, by extension, lowering the price of the product for consumers.
The Nigerian government implemented the fuel subsidy regime in October 2000 in order to make the product more affordable to citizens while also stimulating economic growth.
However, in recent years, the fuel subsidy has become a contentious national issue, with stakeholders alleging that it is riddled with corruption and has become a racket for those in the oil marketing business to fleece the state. The fact that the subsidy consumed a large portion of national funds, to the tune of N400 billion per month, made its sustainability untenable.
Furthermore, it was a stark contrast to Nigeria’s position as one of Africa’s largest oil producers, which imports almost all of its refined petroleum products at a significant cost to the government.
It became clear that the fuel subsidy regime was an anomaly that needed to be ended.
However, former President Goodluck Jonathan attempted to remove the subsidy in January 2012 but failed due to fierce opposition from the Nigerian labour union, which shut down the country’s economy with overwhelming nationwide protests against the government’s move.
Removing the subsidy became a minefield through which the government had to tread carefully.
Prior to his departure on May 29, President Muhammadu Buhari reiterated that fuel subsidies would be phased out in 2023.
The Buhari administration justified the repeal by claiming that the amount of money sucked up by petroleum subsidies denied other sectors of the country, such as infrastructure, health, and education, much-needed funds for revitalization.
And indeed, according to the Nigeria Extractive Industries Transparency Initiative (NEITI), the government spends at least N3.6 trillion a year on fuel subsidies.
In a bold move, newly inaugurated President Bola Ahmed Tinubu declared in his inaugural speech on May 29 that the fuel subsidy regime was no longer sustainable and, as a result, had been abolished with immediate effect.
Tinubu’s announcement sparked socio-economic upheaval, with oil marketers immediately raising the price of petroleum products at the pump. The Nigerian National Petroleum Company Limited, NNPCL, increased the official pump price of Petroleum Motor Spirit (PMS) from N195 to 577 per litre in a matter of days.
Following the implementation of the NNPCL’s new price template on May 31, a differential price system prevailed throughout the country, with Lagos State having the lowest pump price of N488 per litre and Maiduguri and Damaturu having the highest pump prices of N577 per litre.
On Friday, June 2, NNPCL Managing Director Mele Kyari explained the rationale for such a drastic decision.
“The government did not fund the subsidy because they didn’t have money to fund it. NNPC has been carrying this burden (paying for fuel subsidy) from its cash flow,” he said.
As transport fares skyrocketed beyond comprehension, the new order stifled social and economic activities in many parts of the country.
Workers in some major cities, including the Federal Capital Territory, were virtually immobilised for the remainder of the week due to their inability to afford the new transport fare.
Chioma Anthony, a midwife, told DAILY POST that she was stranded on the popular Dutse Express on her way to work on Thursday.
According to her, the transport fare from Dutse to Berger, which had previously been N300, has now risen to N800. She emphasised that some colleagues in her organisation have been automatically laid off since Tuesday because their salaries no longer reflect the current reality.
“Sometimes, I do have emergencies in the hospital, and I don’t have a car. Now, how do you expect me to pay N1,000 to go to work every day? How much is my salary?
“I was stranded here on Thursday because I had no money on me and nobody wanted to help.
“Mine is better. Our cleaner and other workers in the organisation automatically stopped coming to work, and there is no need to ask them why. Somebody receiving N50,000 can no longer cope working in the city centre anymore,” she stated.
Her predicament is shared by millions of other working-class Nigerians.
Anthony urged Nigerians to oppose the removal of the subsidy, citing the impending increase in prices of other essential commodities.
“This thing was obviously done without proper planning. There is no plan in place to cushion the effect on us. The FG ought to have, at least, settled the transportation problem, and provided other alternatives before removing the subsidies,” she raved.
Another respondent, Goodluck Ibem, President General of the Coalition of South East Youth Leaders, COSEYL, stated: “The sudden removal of fuel subsidy has led to hyperinflation and an increase in fuel prices from N240 to N700 per litre in parts of the South-East. “The prices of other petroleum products have also increased, resulting in an increase in the prices of goods and services.”
Ibem, who added that “Nigerians are currently facing untold hardship,” urged the President to implement measures “to stop the arbitrary increase in petroleum product prices, hoarding, and other sharp practices by petroleum marketers.”
The COSEYL leader urged the Federal Government to liberalise the petroleum sector as soon as possible in order to attract more investors to build refineries for the production of PMS and other petroleum products.
In his response, Alhaji Yerima Shettima, National President of the Arewa Youth Consultative Forum, AYCF, urged Nigerians to remain calm.
While the President’s decision may be difficult, he believed it is for the betterment of the entire country.
Shettima said: “Every regime comes with its own style. Tinubu’s own came with the total suspension of the fuel subsidy.
“The truth is that Nigerians need to face reality, and the reality is that you can only give what you have; the economy is bad. It is better for him to take that action than to be talking just to impress Nigerians. It is obvious that we don’t have anything in the country.
“Look at the state of our economy today; look at the rising inflation; what about our foreign reserves? Look at our debt so far. No government or individual should assume that it is going to be easy for Nigeria. We have to make that tough decision.”
He articulated further: “The reality is that this fuel subsidy regime has to be suspended. For a long time now, some of us have wanted the government to remove this subsidy. N3.6 trillion in the hands of some useless characters—that is so bad. The subsidy has to go. I trust Nigerians that we will soon adapt to it.”
The AYCF President stated that the government must implement palliative measures to mitigate the impact of subsidy removal on Nigerians.
“The government is not so irresponsible that they do not have other programmes to cushion the effect. He (Tinubu) had said that he was going to make sure that one or two refineries work before the end of this year. Then, maybe subsequently, other things like transportation will be put in place,” he said.
He also added: “Let us bear with the government. Let us also find a way to contribute to the well-being of this country rather than always complaining about what the government should do for us.”
Meanwhile, the Nigeria Labour Congress (NLC) has declared a nationwide strike beginning next Wednesday to protest the plight of workers as a result of the subsidy removal.
The union made the announcement during a meeting of its National Executive Council (NEC) in Abuja, the Federal Capital Territory.
On the plus side, there is evidence that the government is aware of the negative consequences of abruptly terminating the fuel subsidy.
President Tinubu stated on Friday that his administration is willing to review the current N30,000 minimum wage in light of current global realities.
According to him, improved livelihoods for Nigerians are still a top priority for his administration, and the national minimum wage needs to be revised to reflect realities.
The President stated at the State House in Abuja when he received members of the Progressive Governors Forum (PGF), led by its chairman, Governor Hope Uzodinma of Imo State, that the national and sub-national governments would collaborate on the minimum wage.
He said, “We need to do some arithmetic and soul-searching on the minimum wage. We will have to take a look at that together, and the revenue. We must strengthen the source and application of our revenue.’’
