The hasty removal of fuel subsidy

6th June 2023

The hasty removal of fuel subsidy by President Bola Ahmed Tinubu administration has led to astronomical increase in the pump price of petrol as well as the return of long queues at filling stations across the country. It has equally led to high cost of goods and services. Many commuters now trek to work as a result of the new high pump price of petrol. Undoubtedly, the removal of petrol subsidy has disrupted economic activities of most Nigerians.

In his inaugural address on May 29, President Tinubu declared that ‘petrol subsidy is gone.’ Expectedly, the announcement which came when Buhari's provided fuel subsidy would stop at the end of June 2023, shocked Nigerians. Following the announcement, the Nigerian National Petroleum Company Limited (NNPCL) rolled out a template of new pump prices of petrol across the country, ranging from N488 to N557 per litre. The increase in the price of petrol is almost 300 per cent over the official old pump price of N167/litre.

The new pump price of petrol announced by NNPCL and its insistence that there would be no going back to the old price, has threatened the negotiation between the government and organised labour. The Nigeria Labour Congress has rejected the new pump price of petrol and called for a return to the old price while negotiation is going on. Let the government listen to labour. Returning to the old price of petrol will provide the much-needed conducive atmosphere to resolve the subsidy matter.

Unfortunately, the tripartite dialogue between the Federal Government, the NLC, and the Trade Union Congress (TUC) ended in a deadlock. The NLC President, Comrade Joe Ajaero, described the pricing template issued by NNPCL as ‘vexatious and an ambush,’ stressing that it runs against the spirit and principles of social dialogue. Rolling out a new price template for petrol without consultation with labour and other stakeholders in the oil sector may likely scuttle the government's ongoing negotiation with labour.

Moreover, the NNPCL and the federal government cannot be advocating for deregulation of the oil sector and at the same time be fixing the prices of petroleum products. That amounts to putting the cart before the horse. The removal of fuel subsidy has been badly managed. It is perhaps the most disingenuous way for Tinubu to start his presidency. However, the unassailable fact remains that Nigeria's fuel subsidy regime is riddled with corruption. Also, trillions of naira had reportedly been spent on subsidy to apparently enrich some oil marketers and top government officials at the detriment of millions of Nigerians.Considering the corruption in petrol subsidy administration, it is expected that it will definitely be terminated. Removing fuel subsidy in phases would have been the ideal thing to do instead of removing all at once. Removing the subsidy without putting adequate palliative measures in place to alleviate the suffering of Nigerians is not the best strategy. Removing fuel subsidy when our refineries are not functioning effectively is untidy. Using fuel subsidy fund to fund health, education, infrastructure, and other critical sectors is good but it does not warrant subjecting Nigerians to avoidable hardships. But the fallout from the subsidy removal saga has clearly shown that the new administration has learnt nothing from previous administrations. President Tinubu would have helped his presidency if he had consulted widely on the issue before making it public.

The timing for the subsidy removal was also wrong. The argument by some government officials that there is no perfect timing for such a thing is illogical. Good timing is critical in government decisions, especially in such a contentious issue as fuel subsidy touches on the lives of Nigerians. A gradual phasing out of the subsidy would have been the best approach. The removal of fuel subsidy is coming at a time that 133 million Nigerians are multi-dimensionally poor. The new pump price of fuel has further eroded the disposable income of Nigerians.

The new national minimum wage of N30,000 per month is grossly inadequate. Sadly, many states are yet to implement it. With the new pump price of petrol, the minimum wage can only buy about 50 litres of petrol, excluding other needs of the worker. There is urgent need for a significant upward review of workers’ salaries. Government and organised should further dialogue on the issue and resolve it amicably. The dialogue should include the modalities for the disbursement of the $800 million World Bank loan meant for palliatives.

The new pump price of petrol is outlandish and unacceptable. Secondly, the N17trillion being bandied about by the NNPCL as expenditure on subsidy in the last eight years is debatable. Nigerians need concrete facts to support the claim. Let the government avert the looming national strike by quickly resolving the matter. Removing the subsidy at this time that Nigerians are passing through multiple challenges will increase inflation beyond the present 22.4 per cent and heighten the nation's insecurity. Before scrapping the fuel subsidy, let our refineries begin to work efficiently.