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Nigerian Government Urged to Reduce Cost of Governance as Fuel Subsidy Ends

 

Fuel Subsidy: A Popular Benefit of Nigeria’s Oil Wealth According to Ordinary Nigerians

President Bola Tinubu’s decision to remove fuel subsidy in Nigeria has sparked a contentious battle with far-reaching implications. During his inauguration on May 29, the 71-year-old president announced the complete removal of the subsidy, stating that it had disproportionately benefited the wealthy and no longer justified its increasing costs given the country’s limited resources. Tinubu pledged to redirect the funds towards investments in public infrastructure, education, healthcare, and job creation, aiming to improve the lives of millions.

Just two days after the announcement, the state oil company, NNPC Limited, raised the pump price of petrol from N189 per litre to between N480 and N570 per litre, representing a more than 200 percent increase. Mele Kyari, the group chief executive officer of NNPC, defended the move, stating that market-based pricing would enhance competition, efficiency, and reflect market dynamics. He also mentioned that the government could no longer afford to pay for fuel subsidies, revealing that NNPC was owed N2.8 trillion in outstanding subsidy payments.

Fuel subsidy has been a longstanding policy in Nigeria since the 1970s. Initially, it was implemented to sell petrol to Nigerians below cost to mitigate the impact of rising global oil prices. However, the cost of subsidizing petrol has escalated over time, with subsidy payments amounting to approximately N11.4 trillion during the eight years of the Buhari administration (2015-2023). These figures far exceeded the government’s spending on education, healthcare, and infrastructure during the same period.

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NNPC towers, CBD Abuja

The removal of fuel subsidy has been a contentious issue in Nigerian politics, particularly during the 2023 general elections. All three major presidential candidates, including Tinubu, had promised to eliminate the subsidy. The World Bank and many Nigerian economists have advocated against the retention of fuel subsidy, citing its wastefulness, vulnerability to corruption, and encouragement of smuggling.

Despite the elite consensus on the need for subsidy removal, many ordinary Nigerians perceive it as a rare benefit of the country’s oil wealth that directly affects their lives. In 2012, a previous attempt to remove fuel subsidy by former President Goodluck Jonathan led to widespread protests, strikes, and public unrest, forcing the government to backtrack and reinstate the subsidy.

Since Tinubu’s decision to remove the subsidy, the cost of living in Nigeria has significantly increased. Transport fares and prices of essential goods and services have surged, affecting the population at large. There has been a notable rise in ride fares and ride-hailing services due to the increased cost of petrol.

The Nigeria Labour Congress initially planned an indefinite strike to protest the subsidy removal but agreed to suspend it after a meeting with the government. Discussions are ongoing regarding the demands put forth by the unions, including the upgrading of state-owned refineries to produce petrol domestically and keep prices low.

To alleviate the impact of subsidy removal, compensatory measures must be implemented to partially cushion the population from the price shock. Inflation is already high and expected to increase further, potentially pushing more Nigerians into poverty. The Trade Union Congress has called for an increase in the monthly minimum wage and made various demands that the government is considering.

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While the Nigerian government promises that the resources saved from subsidy removal will be channeled into developmental programs, citizens are calling for government officials to reduce their excesses and curb wasteful expenditures. They argue that removing subsidy while maintaining a high cost of governance is unjustifiable. The recurrent expenditure of the federal government has significantly increased since 2015, raising concerns about the allocation of resources.

The success of Tinubu’s administration in permanently ending fuel subsidy, managing the challenges during the transition, and redirecting resources to critical sectors such as infrastructure, health, education, and security remains to be seen. However, government representative Dele Alake

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