Probable economic impacts of new governance as it relates to fuel subsidy removal in Nigeria

The nation of Nigeria has barely transitioned its government to a new political dispensation under the presidency of Ahmed Bola Tinubu (GCFR), and one of his several pronouncements is the removal of the fuel subsidy (premium motor spirit, PMS), which has been a debate for more than a decade.

The immediate past administration had announced plans to remove subsidies in June 2023; however, it left that decision for the incoming government. The immediate past president of Nigeria, Mr. Muhammedu Buhari, apologized to Nigerians in one of his speeches for the unfavorable outcome of some of his economic policies. My discussion on this topic will be like that of the average Nigerian.

Nigeria was adversely hit by a six-month petrol scarcity for reasons best known to the government, and only about a month ago, queues at petrol stations began to dwindle despite the fuel pump price being raised from N165 ($0.23) to N205 ($0.28), even though I was in a community a few days ago and their pump price was N260 ($0.35). It was a double tragedy for Nigerians as the cashless policy was equally introduced, only to be lifted after the elections after the masses suffered and some even lost their dignities and lives.

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Barely 24 hours after the new president of Nigeria, Mr. Ahmed Bola Tinubu, announced the removal of fuel scarcity, which was unexpected by many Nigerians, the unimaginable has occurred as queues have resurfaced at petrol stations all over Nigeria. Some petrol stations have already locked up their gates, perhaps in anticipation of a price hike due to the removal of the subsidy. Major challenges we face as regards the fuel subsidy include, but are not limited to, the following:

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A. Fuel scarcity: fuel scarcity has become a thorn in the flesh of Nigerians. The question we should ask ourselves is: Is the fuel scarcity real or artificial? I want to believe it is artificial as a result of hoarding. In a bid to make profit, the petrol marketers would also hoard the old stock of PMS they have in anticipation of a new pump price. Nigerians have started panic buying of fuel in anticipation of fuel scarcity amd hike.

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B. Fuel hike: once fuel scarcity knocks, it is almost certain that there will be a hike in the price of fuel. Every scarce commodity has a tendency to exhibit variation in pricing, and fuel will not be an exception.

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C. Goods and services hike: Nigerians are quick to hike every good and service on the premise of fuel scarcity. Will you blame the average market woman who, with difficulty, got her goods transported down to her base or point of delivery? Nobody would want to take the brunt of the fuel scarcity and hike, and hence, they would increase the price of whatever they had to sell or offer.

D. Poor power supply: I have always believed that if Nigeria had a good power supply, we would have less dependence on fuel and its products. With fuel scarcity and hikes complementing the poor power supply constantly ravaging the nation of Nigeria, even the prices of alternative power supplies like solar/inverters, charcoal, etc. are bound to increase.

E. High cost of running businesses and industries: taking a cue from the above point, it is common knowledge that most businesses and industries run on alternative power supplies such as PMS, diesel, etc. The removal of subsidies with proportionate increases in fuel prices will compel the businesses and industries relying on them to increase their costs of production and perhaps cut down on some excesses, including jobs, especially in the private sector.

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F. Dangers of fuel hoarding: beyond the fume emanating from storing fuel at residential places, there is an increased risk of accidents and burns as a result of hoarding fuel. We have heard of accidents worsening as a result of the transportation of fuel in kegs in motorcars and buses; hence, such avoidable accidents are bound to resurface.

G. High cost of transportation: transporters that had difficulty obtaining PMS would gladly increase the transport fare. A bad habit with those transporters is that even when the scarcity or hike subsides, they hardly compare the prices to the previous one as they have enjoyed the new hiked tariff.

As much as I would love to continue these points, permit me to digress to some vital topics, even if I just mention them.

A. Refinery: The business mogul, Dr. Aliko Dangote, recently inaugurated its oil refinery on May 22, 2023, with the expectation of processing six hundred and fifty thousand (650,000) barrels of crude oil per day, making it the largest single-train refinery in the world. It has an investment of over nineteen (19) billion US dollars and is capable of creating one hundred and thirty-five thousand permanent jobs in the region. I will not mention the politics surrounding the timing of the commencement of the refinery or the timing of the fuel subsidy removal.

B. The poorly implemented minimum wage of N30, 000 ($41) has barely sufficed or matched the hardships of the average Nigerian. An upward review and implementation of the minimum wage to affect all quarters would be appreciated.
Interventions to ameliorate the burdens provoked by the fuel subsidy removal are yet to see the light of day.

C. Interventions such as the provision of a cheaper public transport system to the populace, cutting down on the cost of governance, mortgage loans, and houses, reducing interest rates on borrowing, etc. would be a great cushion to the average Nigerian and should have commenced and been working prior to the subsidy removal.

Thank you for reading. I would love to have your comments and contributions. 🤗

DANGOTE REFINERY

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