At the rate of N185 per liter, Nigeria’s petrol pump price is the lowest in West Africa. In neighbouring Benin Republic, petrol price is N400.8 per liter. In Togo, the product sells for N397.3 per liter. In Sierra Leone, petrol sells for N494.8 per liter.
Ironically diesel is pretty cheap in Benin Republic. One liter sells for $1.14 (N524.4 at the official exchange rate of N460 to the dollar). In Nigeria diesel sells for anything from N750 per liter.
Nigeria deregulated the pump prices of diesel and aviation fuel about 16 years ago but no one in the federal government has mustered the courage to permanently deregulate the pump price of petrol. Former President Goodluck Jonathan tried it in January 2012. The exercise kicked up riots that almost toppled his government.
President Muhammadu Buhari tried it in 2017 but was forced to retraced his steps when increase in crude oil price pushed the landing cost of petrol above the official pump price of N145 per liter.
Rather than allow the rising price of crude oil to determine the pump price of petrol, the president surreptitiously ordered the then Nigerian National Petroleum Corporation (NNPC) to write off the difference between the landing cost and pump price of the product.
Since then, NNPC had swindled Nigeria as it doubles the country’s petrol consumption figures and deducts subsidy on the fictitious figures. Buhari’s administration had on several occasions tried to withdraw petrol subsidy only to incur the wrath of consumers and labour unions.
This time the federal government appears to be determined to withdraw petrol subsidy by June 2023 despite the raging controversy.
Even the World Bank and International Monetary Fund (IMF) are worried about the trillions of naira Nigeria is washing down the drain in the name of petrol subsidy.
The bank has therefore advanced a grant of $800 million to the federal government for petrol subsidy removal palliative. The money would cushion the effect of petrol subsidy withdrawal on Nigeria’s 132 million people living below poverty line.
The dilemma is that no one knows precisely how to administer the World Bank palliative. Mrs. Zainab Ahmed, Nigeria’s finance minister said that the money would be shared among 50 million Nigerians (10 million households) in extreme poverty. She did not say precisely how much would go to each of the beneficiaries.
The federal government had in 2021 planned to pay a monthly stipend of N5, 000 each to 40 million poor Nigerians as palliative for petrol subsidy removal. Government rescinded the plan when it became obvious that it was more expensive than petrol subsidy.
If the federal government uses that formula for the sharing of the World Bank palliative, it would be paying a monthly stipend of N5, 000 each to 50 million people.
That amounts to N250 billion per month. In a year the federal government would spend N3 trillion on petrol subsidy palliative. That sounds more like cutting the nose to spite the face, especially when petrol subsidy for 2022 was just about N3 trillion. That subsidy bill held down inflation for everyone in the economy. Spending such amount on just 50 million poor people could trigger inflation at a rate that would worsen the plight of even the beneficiaries of the palliative.
Palliative relieves the symptoms rather than cure the causes of disease.
The danger in the formula that the federal government is likely to use in sharing the World Bank palliative is that Nigeria has 132 million people in abject poverty and no one can guarantee an equitable distribution of the palliative given the surging rate of corruption in the land.
If the palliative is to be extended to everyone in abject poverty, the federal government would spend something close to N8 trillion in petrol subsidy palliative annually.
One thing that advocates of subsidy withdrawal are yet to reckon with is that the policy would push Nigeria’s inflation rate perilously close to 30 per cent. That suggests that millions more would be pushed below poverty line. About 140 million people may qualify for the palliative.
However, petrol subsidy is a thorn in everyone’s flesh. The federal government abhors it because it consumes a third of the nation’s miserable revenue annually.
Consumers detest it because the federal government’s incompetence and overwhelming corruption killed Nigeria’s refineries and allowed the importation of petrol with a weak naira to consume what could be used to rehabilitate Nigeria’s decaying infrastructure.
The hard truth however is that Nigeria has reached a point when petrol subsidy must stop. Nigeria’s unfathomable corruption has made petrol subsidy an intolerable anachronism.
Someone in the federal government must draw up an acceptable formula for cushioning the effect of subsidy withdrawal not only on those in extreme poverty, but those at the low income bracket.
The withdrawal would simply torch off a wave of inflation that Nigeria’s weird income distribution system would leverage on to escalate poverty. The palliative should not begin and end with dolling out stipends to those in extreme poverty. Nigeria’s income distribution system must be reformed.
The National Assembly is a crushing burden on Nigeria’s economy. Ekiti state budgeted N113.57 billion in 2023 for its 3.5 million people. Ironically, the 2023 budget for 469 members of the National Assembly is a staggering N228 billion.
The yawning gap must be bridged to free funds to cushion the effect of subsidy withdrawal on the weak. Top politicians and civil servants must cut their coats according to Nigeria’s cloth. No one should keep more than two cars with engine capacity of 2.0 CC each.
Nigerian employers both public and private are very cruel to pensioners. Some pensioners have not been paid for five years. Those ones would simply be forced into poverty by the inflation to be triggered by the subsidy withdrawal.
Government must reduce politicians’ severance pay to protect ordinary pensioners. The skewed income distribution system is why Nigeria is the world headquarters of poverty.
Subsidy withdrawal will worsen poverty if income distribution is not restructured.
The World Bank petrol subsidy palliative
