Now that fuel subsidy is gone

After so many years and several attempts at removing the controversial, albeit, fraudulent subsidy on petrol, the scheme would finally cease to exist in Nigeria; BENJAMIN UMUTEME reports.

Several times, the former President Muhammadu Buhari-led federal government had attempted to stop subsidy payment on petrol, and each time, it had had to reverse itself. The last time was 2022, when the immediate past minister of finance, budget and national planning, Mrs. Zainab Ahmed, told journalists that the government would not be continuing with the payment of subsidy on petrol in 2023.

 According to the minister, the continuous subsidy of petrol had become unsustainable. Experts have argued that the government was borrowing to fund subsidy payment.

Again, there was a volte face from the government at the 2023 budget breakdown, when the minister announced that the federal government had decided to extend subsidy payment till April and later June ending.

There continues to be questions around the actual amount the government spends on subsidies. Many say it has been more of conjecture as even the government does not know the exact amount of petrol that is consumed daily by Nigerians.

Over the years, it seems Nigerians have come to a consensus concerning the removal of the fraudulent subsidy scheme. Even industry players that over the years resisted the removal have finally not only seen the light but have vociferously called on the government to do away with it.

The Washington-based lender, the World Bank, and the International Monetary Fund, had over the years warned of the dangers of continued payment of subsidies by the federal government.

In its recently released Macro Poverty Outlook for Nigeria: April 2023, the World Bank stated that Nigeria’s fiscal and debt pressures will increase if petrol subsidy is not phased out in June 2023.

The global development finance institution said oil price booms previously supported the Nigerian economy but the situation has changed since 2021. While the IMF warned in February 2022, that fuel subsidy could hit a record N6 trillion mark by the end of the year.

According to the multilateral lender, a macro-fiscal stress test it conducted on Nigeria showed that interest payments on debts in the country could amount to Nigeria using 100 per cent of its revenue to service debts by 2026 if not closely monitored.

And true to the IMF warning, available data showed that the federal government spent the sum of N6.620 trillion on fuel subsidy in 2022. This, experts say, is more than the budget of 4 ministries for one budget circle put together.

According to figures obtained from the website of the budget office of the federation, the sum of N3.35 trillion was provided by the Buhari regime for fuel subsidy for the first half of 2023, before it will stop funding the fraudulent regime.

The government had also gone ahead to secure $800 million from the World Bank as part of plans to cushion the impact of the removal on the most vulnerable population in the country.

For civic organisation Connected Development (CODE), the petrol subsidy being funded by the government meant the poor people had always subsidised the rich.

The chief executive officer of CODE, Malam Hamzat Lawal, noted that the continued payment of fuel subsidy is unacceptable.

He said: “We are subsidizing the rich, not the poor. The poor are actually bearing the brunt. And we spend over N50 billion daily subsidising the rich people who can afford it.”

Out of context                  

While many were still locked in discussion on the rightness or wrongness of the $800 million World Bank loan, President Bola Ahmed Tinubu in his inaugural speech reminded Nigerians that there was no provision for fuel subsidy in the budget as from July. 

In his speech, the president had said, “We commend the decision of the outgoing administration in phasing out the petrol subsidy regime which has increasingly favoured the rich more than the poor.

“The fuel subsidy is gone. Subsidy can no longer justify its ever-increasing costs in the wake of drying resources. We shall instead re-channel the funds into better investment in public infrastructure, education, health care and jobs that will materially improve the lives of millions.”

The hawks that had always benefited from the fraudulent regime pounced and immediately, fuel queues sprouted up in filling stations across Nigeria and with it increased the pump price of the product.

Backing the president

For the NNPCL, the pronouncement by President Tinubu’s will empower it to function as a commercial entity.

Lauding President Tinubu’s bold step, the Group Chief Executive Officer (GCEO) of NNPC Limited, Malam Mele Kyari, said it is a welcome decision to end subsidy payment on petrol (Premium Motor Spirits (PMS).

According to Kyari, the cost of subsidy has been a huge burden on the continued operations of the oil company.

“We have been funding the subsidy from the cash flow of the NNPC since the government is unable to defray the costs of the subsidy that is due to the company.

“We believe that this will free resources for the NNPC to continue to do the great work that this company will do for our country. It will also allow us to continue to function as a very commercial entity that will work on this development,” he said.

Drumming support for the President’s decision, Professor Uche Uwaleke, told Blueprint Weekend that Tinubu’s decision to go with the template laid down by the Buhari administration is in order considering the huge cost of subsidy on the economy.

“I support the removal of the fuel subsidy due to its huge cost on the economy. Fuel subsidies have proven to be sustainable. I equally suspect unification of exchange rates because doing so will discourage round tripping, bring more transparency to the forex market which supports foreign investments.

“However, in order to minimise negative impact on the livelihoods, issues of fuel subsidy and exchange rates unification which he mentioned in the speech should be handled with care. Stakeholder engagement is required.

 “To this end, I suggest an immediate constitution of an ‘Economic policies’ coordinating committee’ made up of Economic and Finance experts.”

Confusion

However, there have been arguments that the pronouncement by the President threw up the chaotic situation being experienced across the country.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) has described as “a state of confusion,” the looming fuel crisis across the country, blaming it on President Bola Tinubu’s announcement on Subsidy removal on Monday.

IPMAN’s chairman in Cross River, Prince Robert Asua Obi, said the announcement by Tinubu on the removal of the fuel subsidy plunged the nation into a state of confusion and panic since there is no clear understanding of the policy direction for the petroleum market.

“It is the announcement that has thrown the country into this panic situation that we are in today because we don’t really know the direction to follow now,” he said.

Even the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) have equally condemned the statement, saying the president’s statement was insensitive.

NLC statement which was signed by the president, Comrade Joe Ajaero, read: “We at the Nigeria Labour Congress are outraged by  the pronouncement of President  Bola Tinubu removing ‘fuel subsidy’ without due consultations with critical stake holders or without putting in place palliative measures to cushion the harsh effects of the ‘subsidy removal.

“Within hours of his pronouncement, the nation went into a tailspin due to a combination of service shut downs and product price hike, in some places representing over 300 per cent price adjustment. 

“By his insensitive decision, President Tinubu on his inauguration day brought tears and sorrow to millions of Nigerians instead of hope. He equally devalued the quality of their lives by over 300 per cent and counting.

“It is no heroism to commit against the people this level of cruelty at any time, let alone on an inauguration day. If he is expecting a medal for taking this decision, he would certainly be disappointed to receive curses for the people of Nigeria considering this decision not only a slight but a big betrayal.

Marketers draw blood

Since the announcement, oil marketers hurriedly shut the gates of their stations and quickly adjusted their meters with some adjusting it to as high as N700 per litre of petrol. Across the states, prices have ranged from between N500 to N700 per litre.

In Lagos, commuters were left stranded as fare prices skyrocketed. Filling stations were selling the product between N500 and N800 per liter with long queues, thereby causing heavy traffic.

In Niger, it was N250 and N300, Borno and Yobe N300/N400, Adamawa (N350-N600),  Kwara (N650), Cross River (N500), Ogun (N400), Enugu (N350-N500), Delta (N500-N700), Ebonyi (N550), and Bayelsa (N500-N600). Just to mention a few.

‘Greed driving scarcity, price hike’

For ex-BBNaija housemate Tacha, Nigerians are to blame for the hike in fuel prices shortly after the inauguration of President Bola Ahmed Tinubu. According to her, the greed of Nigerians is to blame for the present situation in the country and not President Tinubu.

She said: “Let nobody deceive you, Tinubu is not the problem, we ourselves are the problem.

“The president just made a statement, he has not yet announced that the subsidy has been removed, he only said he will remove it but it hasn’t been removed. We have started hiking the price of everything and fueling stations have already started selling fuel at increased prices, selling fuel for N500.”


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