The debate about fuel subsidy has featured prominently in socio-political discourses in Nigeria for ages. Fuel subsidy was introduced in the 1970’s to reduce the impact of rising global oil prices on Nigerians. The federal government of Nigeria since then spends trillions of naira yearly on payment of subsidy on petroleum products. It has repeatedly tried to stop the payment in favour of market-determined prices but the pushback has always been formidable. Many have described the attempt by any President to remove it as political suicide due to pushback from the populace.

In 1986, President Ibrahim Babangida as part of his Structural Adjustment Programme (SAP) announced a partial removal of oil subsidies, which saw petrol price rise from 20 kobo to 39 kobo per litre. This move was recommended by the International Monetary Fund (IMF), the same institution advising the present administration to remove subsidy. President Babangidas decision was opposed by Nigerians. Demonstrations by students and worker unions erupted across the country. In 2012 President Goodluck Jonathan abruptly removed subsidy. This decision triggered a week long protest by civil society groups, students and labour unions that forced President Jonathan to eventually soft pedal and agreed to restore part of the subsidy. Ironically, opposition politicians off then like Mallam Nasir El-rufai and General Muhammadu Buhari opposed President Jonathan’s decision vehemently, but the duo are today Governor and President respectively, and they’re in favour of removing subsidy. What changed? Perhaps the reality of office.

Fuel subsidy is perceived as perhaps the only dividend of democracy the people still enjoy. But at what opportunity cost?

Certainly at the cost of spending less on other development objectives, integral sectors of the economy and the distribution of less resources to the state governments. The vast majority of the subsidy and its payments goes to better off Nigerians partly due to corruption, lack of transparency and profligacy.

Quite simply, the term subsidy implies an amount of money paid by government to an industry or business to keep the price of a commodity low. Subsidies exist because the government fixes the price of fuel for consumers lower than the international price and uses government resources to pay for the difference. Nigeria has spent N10 trillion on subsidy from 2006 to 2020. Perplexingly, investigations over the years reveal that the bulk of the amount spent on subsidy has for a large part been obtained through fraud and false pretence, a strong reason for its removal. Nigeria’s daily consumption of fuel has also been a controversial issue with NNPC churning out unstable figures.

Minister of Finance, Budget and National Planning – Mrs Zainab Ahmed

The Federal Government has announced through the Minister of Finance, Budget and National Planning that it would from next year transfer about N2.4trillion to 20 – 40million Nigerians as transportation grant as it moves towards removing subsidy on fuel, otherwise known as Premium Motor Spirit. Government envisages that by removing subsidy, it would force competition amongst oil marketers which will result in price reduction. A transportation grant of N5,000 for 40 million people would amount to N2.4 trillion. This is way more than the N1.8 trillion presently spent on subsidy. Ostensibly, it seems like subsidy is being ended to start another costlier one. But the transportation grant is temporary and would only exist until the price of a litre of fuel drops.

Experts and stakeholders posit that subsidy removal may address key economic situations in the country, especially conservation of foreign exchange, increase in external reserves, boost for local refineries and related industries, as well as job creation. Removal of subsidy would reduce burden on foreign exchange, help boost foreign reserves, strengthen naira and help other industries to grow through a diversion of resources previously spent on subsidy.

The concerns for many stakeholders border on the uncertainties surrounding the cash transfer initiative. Nigerians are skeptical about the doability of transportation grant initiative in terms of transparency and the challenges it can throw up such as data and metric used to select beneficiaries and duration of the grant. Though, Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed has assured lawmakers that, “The government will make sure that the payments go to the rightful recipients by using biometric verification numbers, national identity cards and bank account numbers”, the absence of a verifiable database of potential beneficiaries puts the efficiency of cash handout in doubt.

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, who announced government’s plan at the launch of the World Bank Nigeria Development Update (NDU), titled ‘Time for Business Unusual’ in Abuja, said 20 – 40 million poorest Nigerians would benefit from the allowance. She added that the final number of beneficiaries will depend on the resources available after the removal of the fuel subsidy.  It can be deduced that the transportation grant initiative being a palliative like measure for the consequential increase in the cost of transport is also a ploy by government to get labour unions of its back and to dampen public rage. This seems to have backfired given that NLC has threatened to hold nationwide protest on January 27th 2022 over Federal Government’s decision to remove fuel subsidy.

The leadership of the country for quite some time has held the position that subsidy is a huge burden, unsustainable, exploitative and not in the best interest of the country but the albatross has always been convincing the people in favour of removing it. Subsidy is renowned for becoming a deep vortex that consumes scarce resources mostly through dubious means. Experts like Muhammadu Sanusi II, 14th Emir of Kano, have always perceived our subsidy payments as a “scam where people who control the levers of power are making billions of dollars from”.

According to the World Bank, the rich are primary beneficiaries of subsidy payments. The rich posses the automobiles and generator sets that run on fuel. Anti-subsidy advocates also term it as bad economics because subsidies ought to be used to trigger investments in productive sectors of the economy such as education, electricity, entrepreneurship, manufacturing and infrastructure, not to finance consumption of petrol.

The masses care less that the monies used to subsidize fuel can be channelled to develop other sectors of the economy such as education, healthcare, infrastructure, agriculture, telecommunication and power. The majority of Nigerians whom are living below the average standard don’t support its removal because of the inflation that it would have on the cost of living, transport fare and food prices. Due to a distrust for government founded on corrupt and profligate antecedents they don’t agree that savings from removing fuel subsidy would be channelled to other sectors of the economy.

The Nigerian economy is suffering from a rising inflation that is creating a large dent in the income of the populace and the removal of fuel subsidy would only accelerate the cost of living in general. Despite persistent economic adversity, recessions, revenue shortfalls, rising unemployment and mounting debts, they refuse to slash costs or reduce their lavish lifestyle maintained at public expense. And this why the populace would continue to rebel against the decision to remove subsidy. Operating a big government despite dwindling revenue and rising debt is callous. The lack of prudence on the path of government has cost it the trust of the people.

In 2022, President Muhammadu Buhari’s office will spend a humongous N1.6 billion on new vehicles. Since elected into office six years ago, the president’s office has spent N5 billion on vehicles – enough to build 500 health centres at N10 million each. It has spent billions more on food, uniforms, travels, a huge presidential air fleet, president’s hospital and more. N12.5 billion will also be spent in 2022 on the Presidential Air Fleet. President Muhammadu Buhari also approved the construction and equipping of a 14- bed presidential clinic at the cost of N21 billion in the 2022 budget this is despite the fact that the state House clinic has maintained an annual budget of billions of naira while lacking medical equipment as basic as a syringe according to the First Lady.  The National Assembly also approved N3.76 trillion for personnel costs in 2021 and the government wants N4.11 trillion for that purpose in 2022. The Presidency, ministries and departments combined plan to spend N37.8 billion purchasing vehicles, as reported by The PUNCH. Brazenly, items like computers, printers and furniture recur every year in the budget, while the craze for acquiring new vehicles cuts across the over 600 MDAs. This annual morbid acquisitions represents wasteful and thoughtless spending.

We operate a budget deficit and borrow from different sources because government revenue is inadequate to fund fundamental expenditure, yet our leaders budget money for mindless and frivolous luxury. This iniquitous behaviour affects our national psyche and cannot in good faith be reconciled with the second hand patriotism government aims to force on the masses. Government needs to be prudent, reduce spending and cut administrative costs.

Nigeria presently imports more than 90% of its refined petroleum needs, this fuel problem can only be solved by developing the country’s refining capacities to boost local production to satisfy local and export demand and raise the much-needed revenue to fund the country’s developmental needs.  To achieve these the Federal Government has would include plans to upgrade existing refineries and the issuance of 25 refining licenses (conventional and modular) to indigenous companies. These initiatives, if executed properly, will bring about growth and reforms within the sector in the medium to long term. The federal government seems to have lost hope in the refining capacity of its moribund refineries and is seeking an alternative solution in the Dangote refinery where it has sank about $2billion recently buying equity. With a refining capacity of 650,000 barrels per day and saving the country a projected $10bn a year through domestic supplies of petroleum products, the Dangote refinery might just be our lifeline.