One of the key reforms that came with the current administration is the removal of fuel subsidy. During his inaugural speech on May 29, 2023, President Bola Ahmed Tinubu announced the cessation of fuel subsidy. Consequently, the price of petrol skyrocketed at filling stations across the country, with some selling as high as N700 per litre.
For many years, the Nigerian economy has been subsidised in various ways, including education, forex, electricity, petroleum products, and agriculture. Fuel subsidy began in the 1970s and became institutionalised in 1977. Although, the scheme has good objectives but it is mired in corruption, mismanagement, and product diversion.
Petrol subsidy had been a serious challenge to successive administrations, as attempts to remove it faced stiff resistance from various groups. Petrol subsidy had cost the Nigerian government an estimated $30 billion over the last 18 years. Additionally, the need to borrow N1 trillion to finance fuel subsidies in 2022 contributed to the increase in the country’s debt profile.
As the sixth largest oil-producing nation in the world, Nigeria has long suffered from the adverse effects of fuel price fluctuations and fuel subsidy, taking a heavy toll on the poor and vulnerable masses.
The hike in fuel prices has increased the financial and psychological burden on citizens. With over 300% increase in fuel pump price, motorists struggle to afford fuel needed for commuting, resulting in higher transportation fares and strained household budgets.
Furthermore, the prices of goods and services have risen due to the heavy reliance on transportation for their distribution. This inflationary pressure erodes the purchasing power of the masses, making it difficult for them to afford necessaries, considering the low minimum wage earned by Nigerians.
Fuel subsidy removal is also affecting small and medium-scale enterprises heavily dependent on its. These businesses may be forced to reduce productivity or shut down entirely, leading to increased unemployment rates in the country.
To mitigate the impact of fuel price hikes on citizens, the current administration should take decisive and favourable steps. The billions of dollars saved from fuel subsidy removal should be channeled into key sectors like education, technology, agriculture, infrastructure development, health, and sports.
Diversifying the energy mix through investments in renewable energy sources, such as solar, wind, and hydroelectric power, is crucial to reduce the country’s dependence on fossil fuels. This will increase environmental sustainability, energy security, and mitigate the effects of fuel hikes.
Reviving existing local refineries and prioritising local refining of crude oil would make fuel prices more affordable. This move would also reduce the importation of fuel, increase revenue, support local production, create jobs, and boost the economy.
In addition, the government should provide palliatives to vulnerable households. However, efforts must be made to ensure that the vulnerable population is accurately identified and given the necessary support.
Fuel subsidy removal is a complex isuue that demands urgent attention from government. The burden on the masses, the escalation of poverty, and the adverse socio-economic impact necessitate swift and decisive actions.
Ultimately, the welfare of the masses should be paramount in government’s decision-making process. A stable and thriving society is built upon the well-being of its people.
Abdulrahman Ozichu Fauziah,
Mass Communication,
Ahmadu Bello University, Zaria
