Subsidy removal: Will this deceit ever end?



Uba Group

I woke up penultimate Wednesday, just like many Nigerians, to the devastating news of the astronomical increase in the pump price of fuel. It was suddenly and shabbily implemented, and this much can be deduced from the hues of Nigerians who had expressed concerns about the new development on social media and traditional media. It got even more confusing when the fuel hike was hinged on the removal of fuel subsidy. Don’t get me wrong, I am not opposed to fuel subsidy removal as I had in the past canvassed for its removal in a series of articles. But I do not want to believe the recent fuel hike has anything to do with subsidy removal as some had tried to portray.

Yes, President Bola Tinubu had hinted about the removal of fuel subsidy during his inauguration speech when he declared that “subsidy is gone.”

However, the manner in which pump price of fuel went up does not in real sense projected the removal of subsidy. In fact, it only replayed a pattern usually employed by the immediate president, Muhammadu Buhari, in jacking up the price of fuel during his eight years rule.

In 2016, the Buhari administration had adjusted the price of petrol from the N87 per litre it inherited to N145 per litre. The justification for that increase at that time was the removal of subsidy. Don’t take my word for it, hear the Minister of State for Petroleum Resources at that time, Ibe Kachikwu, who said that “there is no provision for subsidy in 2016 appropriation,” adding that “As at today, the PMS (petrol) price of ₦86.50 gives an estimated subsidy claim of ₦13.7 per litre, which translates to ₦16.4 billion monthly. There is no funding or appropriation to cover this.”

His position was reinforced by Buhari who disclosed in his Democracy Day Anniversary broadcast that year that the “very painful but inevitable decisions we had to make in the last few weeks specifically on the pump price of fuel” before he went on to explain that traditionally fixing price of fuel, after comprehensive investigation, “my advisers and I concluded that the mechanism was unsustainable.”

The simple inference from the words of Kachikwu and Buhari, who though, was the president at that time, still doubled as the Minister of Petroleum, clearly suggested the removal of subsidy in petroleum products.

Disturbingly however, the same Buhari administration still came up with yet another fuel hike in September 2020 and hinged the development on the removal of subsidy from petroleum products.

“It won’t be good for Nigerians to bear the pains of subsidy removal and the money freed from it ends up in private pockets”

And just like in 2016, the reason for the fuel hike was the removal of subsidy. But the truth, which Nigerians have come to find out, the Buhari government spent more than N11trn to service the same fuel subsidy it had attributed for fuel hike in his eight years in office.

This is why I am not just skeptical but deeply concerned at the latest development because it has every footprint of the Buhari administration’s approach on fuel pump price.

Removing fuel subsidy will mean the full deregulation of the downstream sector, and nothing so far suggested that was what has happened. Deregulation, going by the Cambridge Dictionary, entails the action of removing national or local government controls or rules from a business or other activities. In the Financial Dictionary, deregulation means the reduction of the government’s role in controlling markets. Drawing from both definitions, it is hard to agree with the suggestions that the current fuel hike in Nigeria is in any way related to the removal of subsidy.

Are you lost? Take a look at the price list for pump price of petrol released by the Nigerian National Petroleum Corporation Limited in the early hours of Wednesday, May 31, 2023.

Although some people have contended that the price list was only for stations under its operation, the picture I believe they must have missed is that NNPCL is the only importer of fuel to Nigeria. What this simply implies is that the pricing template of the NNPCL will bear on filling stations across the country. And this could be seen in how every fuel station across Nigeria immediately adjusted the new pump price of fuel. This in every form negates the principle of market forces that should be the determinant of pump price of fuel if subsidy had actually been removed.

So, it is important for the new administration to come out plain on the subsidy issue. It would be totally unfair to Nigerians to make them go through pains that the recent hike in pump price is surely to inflict, and later turn around to claim the existence of subsidy payment as it was the experience under Buhari. If the Tinubu administration is sincere about the subsidy removal, it must do the right thing by opening up the sector to ensure that market forces are what determine the price, not a sole importer of the product, as we have seen with the NNPCL over the years.

This will give room for competition and bring some levels of transparency to the sector, which will in turn, drive benefits for Nigerians. Anything outside this will be a continuation of the mess that characterized the past, which not only unduly inflicted pains on Nigerians, but also swallowed substantial amounts of the country’s wealth that should have gone into far more meaningful interventions.

Between 2005 and now when subsidy got prominent among Nigerians, it has consumed more than N20trn. This is a huge amount of money that could do a whole lot for Nigerians in the health, education and fixing infrastructures among others. It is therefore not in contention that it has outlived its usefulness and needs to go but nevertheless, it should not become a tool to play with Nigerians as done in the past.

Apart from addressing the restriction to the importation of the product to Nigeria, the new administration must detail plans of investing the funds freed from the subsidy regime. This will include putting in place palliatives as done by the Goodluck Jonathan administration when it contemplated subsidy removal in 2012 to cushion the effect on the people, and also clearly pointing out to Nigerians where the money that was supposed to go into fuel subsidy will end up. It won’t be good for Nigerians to bear the pains of subsidy removal and the money freed from it ends up in private pockets.

Ibrahim writes in from Iwo, Osun State, via