Fuel Subsidy Removal in Nigeria: Good Policy but Bad Planning

STATE OF THE NATION

On the 29th of May 2023, the "INEC's selected" President of Nigeria, Bola Ahmed Tinubu, made a proclamation on the day of his inauguration, and this proclamation threw the country of Nigeria into turmoil, much more than it has been in past times.

He made a pronouncement on the removal of fuel subsidy. But this pronouncement has been met with both resistance and increased hardships in the country.

The truth is that the removal of Subsidy on Petroleum in Nigeria is a beautiful policy. In fact, in 2012, the past President, Goodluck Ebele Jonathan, attempted to remove subsidy on Petroleum but the political party of this current administration challenged this act and termed it as evil. They did this because a good number of Nigerians are gullible and can easily be swayed.

At this present moment, Nigeria has a current debt profile of over 77 Trillion Naira (± $150 billion), and the money paid for subsidy is also a borrowed one. In other words, we borrow to consume. If the money borrowed was invested in education, ICT, health or transportation this would have been better and would have reflected more to better the living conditions of the masses.

But, this is where we are!

FUEL SUBSIDY?

By way of definition, fuel subsidy is a policy by the government that aims to support or reduce the financial cost of fuel for consumers. By subsidising fuel, the Government, to a large extent, covers part of the cost of production or importation of fuel, and makes it cheap and affordable for users. This, greatly benefits individuals and businesses as they rely on fuel for daily living, power (electricity) and transportation.

THE EFFECTS OF SUBSIDY

As a Government policy, subsidy can be both beneficial to a nation and it also has a negative impact on the nation.

On the one hand, subsidy can have positive impact on the nation by providing relief to consumers and users of the product (fuel). By this, fuel will be easily affordable and accessible to users with low income. Similarly, it will also reduce the cost of transportation of people and foodstuffs. And finally, since Power (electricity) isn't constant in Nigeria, generator has become a great alternative for the failed Power in the country. Thus, fuel (which is cheap) is used to power generators at home, offices, churches, markets, commercial centers and industries, thereby having great economic benefit to individuals and businesses.

On the other hand, it places great burden on the Government as funds which should have been used to develop other important sectors in the country (like Education, ICT, health and transportation) will be used for subsidising fuel. Also, it doesn't promote private competition in market, as the prices will be somewhat dictated by the government.

FUEL SUBSIDY IN NIGERIA: "AN ORGANIZED CRIME"

In as much as fuel subsidy has aided to reduce the cost of fuel for consumers, the truth is that there is no accountability and transparency in the process.

In the words of Peter Obi, "Fuel Subsidy in Nigeria is an organized crime." This statement is absolutely true and it is owing to the fact that the process lacks transparency, and thus, is very prone to gross mismanagement of funds. The system has been largely manipulated without clear and detailed disclosure of the actual beneficiaries, expenditure reports and subsidy amounts. Thus, huge amounts of funds and oil/fuel have been siphoned/cornered from this program turning it into a full-blown fraud.

So what should be done?

FUEL SUBSIDY REMOVAL IN NIGERIA 2023

For Tinubu, the best way was to proclaim the removal of fuel subsidy on the day of his inauguration!

Prior to Tinubu's proclamation of the removal of fuel subsidy on May 19, fuel was sold at N180 - N195 per litter, just few hours before the pronouncement. But, when he made the pronouncement, immediately fuel stations began to hoard fuel. Then after few days, the price rocketed from N180 to N500+, that's a huge 250%+ increase!

As at now, it is sold at this rate and it has affected almost all the sectors of the country, making life much more difficult for the masses.

No policy was put in place to cushion the effect of the removal, instead it was done haphazardly, as though it were an unimportant policy that has no effect on the citizens.

While I wholeheartedly agree on the need to remove fuel subsidy, the better way would be to put some policies in place that will better the living conditions of the people so that when subsidy is removed it will not lead ti massive hardship.

This is actually rampant in the way Nigerian policies are actually pronounced. They make pronouncement on certain policies without putting policies that will cushion the effect of that policies if enacted. This is why many of these policies are taken for granted because they do not seem to be beneficial to the citizens prima facie.

THE BETTER WAY!

Instead of removing fuel Subsidy 100%, the very first step should have been to tender a transparent account of the subsidy program. By this, we'll have a detailed breakdown and account of the actual beneficiaries, expenditure reports and subsidy amounts. When this is done the unnecessary siphoning of funds will be reduced and all leakages will be blocked.

The next step would be to work on the critical sectors that will be affected by the subsidy removal so that these sectors will be greatly improved. For instance, if the Power sector is worked on, it will reduce individual consumption of fuel at homes. By this, we'll have less people looking out to buy fuel.

When this is done, gradual removal of Subsidy will be the key so that there won't be massive difference in prices as it is gradually removed.

Before it is fully removed, everything will already be in place to cushion and reduce the effect on the citizens. By doing it this way, the hardship will not be much unlike what we are experiencing at this present moment.

What do you think about fuel subsidy removal in Nigeria?

Do you think it is a good policy?

Do you think it was delivered in the best way?

What should have been done?

Let me hear what you think in the comment section.

Politics word needed in the Poliglossar

• Subsidy
• Policy (Government)
• Political....
• Borrow
• Hoard

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• Thumbnail was edited via Canva

I AM KSAM

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