By Ibitoye Priscilla Damilola
I remembered a funny event that occurred a semester ago in school. There was a course that we considered to be tough; hence, we were all scared of sitting for the test. We kept shifting the test date by a week or, at times, two weeks. We all knew it was a necessity to sit for the test; nevertheless, the phobia was quite overwhelming until the school announced the semester examination date and that the test ought to be concluded before examinations kick off; hence, we could not further shift the test.
Similarly, fuel subsidy is a policy that we all know cannot be sustained forever; however, the aftermath of fuel subsidy removal has been quite overwhelming. How will the masses cope with the high cost of transportation? What about the resultant increase in the cost of production and the proportional increase in the standard of living? All these have been the overwhelming thoughts in the hearts of many Nigerians when the subject of fuel subsidy removal is raised. The introduction of fuel subsidies in Nigeria dates back to the early 1970s, when the country’s petroleum sector was nationalised.
The Nigerian government’s decision to subsidise fuel was primarily to cushion the effect of rising fuel prices on the populace and maintain social stability. The aim was to ensure that, despite the volatility of oil prices, the masses could enjoy a stable fuel price.
However, in simplest terms, the commonest issues usually raised against this policy are the corruption encompassed within the policy, the persistent increase in national debt, and the degradation of national infrastructure.
In 2012, the Nigerian government under former President Goodluck Jonathan attempted to remove fuel subsidy, which led to widespread protests and strikes across the country. The government eventually backed down and reinstated the subsidy, but the debate over its removal continued.
In 2016, the government once again attempted to remove fuel subsidy, citing the need to free up government resources and promote efficiency. The decision was met with protests and criticism from citizens, who argued that it would worsen their already difficult economic situation.
Eventually, during the inaugural speech of President Bola Tinubu on May 29, he stated boldly that the fuel subsidy regime was completely over. This decision should not be completely criticised on a neutral basis, as other presidential candidates have promised to do the same. However, how to mitigate against the negative impact of the removal of fuel subsidy becomes the bone of contention.
Subsidy removal and Economic boost
Many people have advocated for the removal of subsidy as a way to boost Nigeria’s economy, increase revenue, and address the nation’s economic problems. Obviously, the removal of fuel subsidies has the potential to boost government revenue generation by cutting down on wasteful spending and raising more funds for other essential projects. As of 2021, Nigeria spends over ₦1.4 trillion ($3.2 billion) annually to subsidise fuel prices, a significant portion of which is lost to corruption and inefficient administration. Removing the subsidy regime and deregulating the downstream sector could increase government revenue, benefiting the economy.
Fuel subsidy removal can also reduce the incentives for smuggling petrol across Nigeria’s borders and eliminate the corruption and inefficiency associated with subsidy payments. The fuel subsidy system has been plagued with fraudulent practises, with some oil marketers falsifying claims to receive payment from the government.
Smuggling is also a significant issue in Nigeria, with the government spending billions of naira to subsidise fuel products smuggled out of the country to neighbouring African states. It was not surprising to hear the lamentations of residents in some neighbouring countries.
Different economists and financial analysts have in various ways postulated that Subsidy removal will enhance fiscal sustainability and accelerate Nigeria’s economic growth and development. The country’s reliance on oil revenues exposes it to external shocks and economic volatility, thus making it challenging to draw accurate budgetary plans. By removing the subsidy regime and diversifying the economy, Nigeria can reduce its reliance on oil revenues and improve its chances of achieving sustainable economic growth.
It would have been quite fantastic and joyfully great if these and other positive effects were the only resultant effects of fuel subsidy removal. However, it is not so because removing fuel subsidies immediately led to a surge in the price of fuel and other commodities, leading to inflation and an increase in the cost of living. These price increases disproportionately affect the poor Nigerian citizens who rely on cheap fuel to power their generators, cook their meals, and move from place to place. It cannot be denied that subsidy removal has caused significant hardship for the Nigerian people.
The issue of subsidy removal in Nigeria is a complex one that requires careful consideration. While subsidy removal may benefit the economy in the long run, it is important to consider the immediate impact on ordinary Nigerians who are already struggling with economic hardship. Ultimately, the government needs to find a balance between reducing government spending and ensuring that ordinary Nigerians do not bear the brunt of its policies. Only then can joy truly come in the morning for the people of Nigeria.
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As much as the removal of fuel subsidy is important, policies to mollify the masses are much more important. Policies should not be considered only after subsidy has been removed. Intelligently and compassionately, master plans ought to have been rolled out before the removal of fuel subsidy.
A second of avoidable pain for Nigerians should be kicked against.
Removing fuel subsidies in Nigeria is a complex and multifaceted issue that requires careful consideration of the potential costs and benefits to the Nigerian economy and citizens. While the justification for subsidy removal is sound and could reduce government expenses while improving revenue generation, careful consideration ought to have been given to ensure a sustainable and equitable transition process that avoids causing a significant negative effect on the most vulnerable members of the Nigerian population.
To this end, there is a great need for the Nigerian government to invest further in its social infrastructure and undertake measures to encourage the development of much-needed sectors and industries, thus creating employment opportunities and promoting economic growth.
The President has taken a very bold step by removing the fuel subsidy. Duly and commendably, Mr. President has addressed the citizens, highlighting the different plans on the ground that will mitigate against the adverse effects of fuel subsidy removal. The fact that the plans cut across different spheres and categories is a good one. We are also hopeful that our refineries will indeed be revived, even as we optimistically look forward to the full operation of the Port Harcourt refinery by December.
There’s a great need for the President to address and ensure productive collaboration with the State Governors. Painfully but true, the 36 Governors do not have the same level of leadership qualities and compassion. We have two governors or probably more who have increased their minimum wages and rolled out supportive palliatives and incentives to their state members.
However, we have some who will never execute any tangible plans unless they are pushed and cajoled. It is painful to know that some Governors have yet to implement the N30,000 minimum wage. Hence, there is a great need for the President to strike an agreement with the Governors and beseech all Governors to do what is necessary in their various states.
The government must not also channel its incentive programmes to cut across different spheres. As the civil servants are being considered, others, such as businessmen and women, farmers, students, drivers, and others, should also be put into consideration.
There is also a need to engage the private sector so that they will be urged or compelled (if need be) to also improve their staff welfare.
Very importantly, the Government (both at the federal and state levels) should have a verifiable and authentic updated social register to efficiently allocate cash transfers and other palliatives to those who are most vulnerable. If this is done, it will help in reducing fraud, ensuring transparency, and improving the effectiveness of poverty alleviation programmes in the various states.
To conclude, the ongoing debate over fuel subsidy removal highlights the need for a balanced approach to governance that takes into account both the needs of the economy and the needs of citizens. Only by working together can we execute solutions that promote both efficiency and prosperity for all.
We hope our leaders will not fail us now that we need them most. For those who have begun to roll out palliatives, they should endeavour to make sure it is well monitored and productive; those who have rolled out plans should begin the execution of their plans in earnest; and those leaders who are yet to make any serious and productive plans should be considerate and act.
If all these are put in place, then we can be sure that there will be joy in the morning, and we can also be confident that the morning is here.
Ibitoye Priscilla Damilola,
Mass Communication,
Prince Abubakar Audu University, Anyigba
Kogi State, Nigeria
Nice one