The recent affirmation by President Bola Tinubu regarding the removal of fuel subsidies has sparked intense debates and discussions on the potential benefits it can bring to Nigeria. If you are also a news addict, you have read about why the move has enormous potential benefits and must happen now.
Arguments for the removal have highlighted the anticipated gains as reducing the fiscal deficit and easing the burden of mounting debt by saving about N7 trillion into the federation account. Economists believe Nigeria is in dire financial straits, and an immediate end to a subsidy financed through borrowings would help the country save trillions. Pro-subsidy removal advocates hope the move would stimulate economic growth from more private investments in petroleum refineries, petrochemicals, and fertilizer plants. Post subsidy regime, marketers are free to source foreign exchange globally to import petroleum products and recover their costs without impediments or interference from the government.
According to statistics, three-quarters of fuel sold in the country is to private firms, public transportation services, government agencies, and other businesses, vehicles used for carrying large numbers of people (such as molue), and goods are deregulated diesel-powered. Similarly, kerosene used in poor households is no longer subsidized, meaning the economically disadvantaged in the country already pay market prices for their fuel. For the benefit of subsidy to reach its intended recipients, the current structure will need to be reviewed and creatively restructured.
According to a Price Waterhouse Coopers (PwC) report, the Nigerian government spent over $30 billion on fuel subsidies over the past 18 years. It maintained that fuel subsidy payments have also distorted the economy, stressing that households in the bottom 40 percent of the income distribution account for less than 3 percent of all fuel purchases.
As numbers of how much the country loses continue to fly around, it is worth noting that Nigerians have seemingly prepared themselves for the gloom to precede the rainbow touted as the eventual result of this increased burden of a 400% increase in the fuel price judging by the little resistant or protest against the new pump prices, seems like Tinubu became President when Nigeria had no choice but to do something about this subsidy regime. Ironically people are buying into the vision of a leader who led the resistance in 2012 when an opposition government last tried to end the subsidy. The president then, attacking the policy, described it as tossing the people into the depths of the midnight sea. Talk about stars aligning for someone whose ascension to the throne looked bleak.
The new petrol prices were adjusted upward from N189 to N194 per liter to N537 in Abuja and other North-central states. In Lagos and other South-west states, a liter of petrol now sells for between N488 and N500 per liter. In the South-east, the price will range from N515 to N520, while in the North-west, the price will be between N540 and N545. In the northeast, it moved from N199 to about N557 per liter. For the South-south, petrol is now from N511 to N515 per liter.
As enticing as the promises of future gains to soothe these increments may seem, the Tinubu-led administration must ensure that a cut in the expenditure of this magnitude translates into a better life for the people in order not to squander the goodwill he currently enjoys with Nigerians.
In the short term, the $800 million (more than N386 billion) borrowed from the World Bank to cushion the impact of subsidy removal should not be swallowed by a snake. There must be transparency and due process in selecting the ten million poor households targeted to benefit from the loan, the government must provide constant and adequate information regarding every step of the disbursement.
For the long term, tackling the issue of epileptic electricity will drive down fuel used to power generators since 40% of Nigerians spend about $14 billion annually to fuel their generators to keep their businesses running or power their homes.
Strengthening public transportation and reducing food prices must be at the front burner of this present government to ease the burden on Nigerians.
Job creation, the constant overhaul of basic infrastructures, and tackling insecurity are measures for poverty alleviation and eventual eradication.
As Nigerians seem to have embraced the cross of hike in the cost of living, it’ll be hypocritical, insensitive, and irresponsible to again, ask that these ever-resilient citizens continue to bear these burdens without this administration drastically tackling the issue of corruption and wastage in governance.
This write-up by Abimbola Animasaun-Yagboyaju x-rays how to cater to the long-term interest of Nigerians.
