Nigeria’s Rich Gulps Lion’s Share as Fuel Subsidy Hits N21.7trn in 18 Years

Emmanuel Addeh in Abuja

Nigeria’s spending on its controversial fuel subsidy regime has gobbled up about N21.7 trillion in the last 18 and a half years, a THISDAY computation of data from the Nigeria Extractive Industries Transparency Initiative (NEITI) and an independent review of figures between 2005 and the first half of 2023 has shown.

While between 2005 and 2021, N13.7 trillion was spent on subsidising petrol for Nigerians, a THISDAY analysis of the expenditure on the product in 2022 and the first half of 2023 indicated that N8 trillion would have been paid out for the purpose by June this year.

However, quoting the result of a study provided by the National Bureau of Statistics (NBS), NEITI said that expenditure on petroleum products by the five income groups in Nigeria showed that the richest 20 per cent consumes 75 per cent of petrol in Nigeria while the poorest 20 per cent consumes just 1 per cent of the product.

Extending the analysis to cover more income groups, the initiative said that the NBS data also confirmed that the richest 40 per cent consumes 90 per cent of the fuel while the poorest 40 per cent consume 4 per cent of fuel subsidy spending.

According to NEITI, the lopsided figures are attributable to the vehicle ownership data in the country whereas the rich have multiple cars with the use of Premium Motor Spirit (PMS) accounting for 96 per cent of total products consumed in the country.

 “This implies that 90 per cent of PMS subsidy benefits go to the rich, and just 4 per cent to the poor,” the report stated.

A breakdown of the figures showed that in 2005, the base year for the survey, N351 billion was spent on petrol subsidy, while in 2006, 2007 and 2008 respectively, N257 billion, N272 billion and 631 billion were spent respectively for the purpose.

In 2009, subsidy gulped N469 billion, it was N667 billion in 2010 while in 2011, Nigeria expended an unprecedented amount (at the time) of N2.1 trillion on moderating the price of the fuel.

Furthermore in 2012, Nigeria spent N1.36 trillion; N1.32 trillion in 2013; N1.2 trillion in 2014, N654 billion in 2015 and N240 billion in 2016 as well as N154 billion in 2017.

Besides in 2018, 2019, 2020 and 2021 respectively, fuel subsidy gulped N1.1 trillion; N508 billion; N864 billion and N1.43 trillion separately for each year. However, a THISDAY analysis of the figure in 2022 showed that N4.4 trillion was spent for the purpose while between January to June this year, subsidy will consume N3.6 trillion, rounding off the amount at N21.7 trillion for the years under consideration.

The low subsidy expenditure in some of the years under review was due largely to the price modulation system put in place by the government during the period, even though the size of subsidy payments generally reflects the level of crude oil prices at any point in time.

While an earlier study in 2015 measured the impact of subsidies on all fuels, including kerosene, and found that the rich enjoy twice as much benefit from fuel subsidies as the poor, the lower concentration of benefits in the second result showed that the benefit of subsidy kerosene is more evenly distributed across income groups.

However, kerosene is currently priced out of the hands of the poor as a litre currently sells for over N1,500 in the black market where it is mostly available.

Introduced over 50 years ago as a temporary intervention to reduce the impact of the sharp rise in global prices due to the middle east crisis, petrol subsidy disbursement in Nigeria has become controversial as it is opaque.

For over two years, the Nigerian National Petroleum Company Limited (NNPC) has not remitted funds to federal accounts , a development it partly blames on fuel under-recovery payments.

A few weeks ago, the National Economic Council (NEC) said it had agreed that petrol subsidy should “not be removed” as earlier planned for June 2023.

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed to journalists that the council agreed on the need for continued discussions on the issue, stressing that the federal government together with states and representatives of the incoming administration, require more preparatory work.

 “Council agreed that the timing of the removal of fuel subsidy should not be now. But that we should continue with all of the preparatory works that need to be done and that this preparatory has to be done in consultation with the states and other key stakeholders including representatives of the incoming administration,” she stated.

Although many Nigerians believe that the removal of petrol subsidy is long overdue, a number of its citizenry also argue that withdrawing subsidy will throw many Nigerians into untold hardship.

Renowned human rights lawyer, Femi Falana (SAN) recently argued against the federal government’s plan to remove subsidy in June 2023, describing it as illogical that the government wants to end fuel subsidy payments because of smugglers. “The policy will create more poverty in the country,” he argued.

He added: “I can never (support total subsidy removal). You know why? I am saying Section 14 of the constitution – it’s not my own making – provides that the security and welfare of the people shall be the primary purpose of the government.

“So, the government has to take care of the welfare of the people and ensure that in providing subsidy for the needy, you do not enrich criminals as it is going on now.

“And that is why you have a government in place, to deal with those who are committing crimes – economic crimes and other types of crimes. And that is what is going on in our country,” he said.

In addition, a Petroleum Engineer, Martin Onovo, also recently explained that the Nigerian government had embarked on fuel subsidy removal at least 20 times in the last 40 years with no economic benefit to the country.

He said subsidy removal would further shoot up inflation, leading to naira devaluation, maintaining that Nigeria must stop the importation of fuel products by reinvigorating its local refinery capacity.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) also said it is opposed to the removal of subsidy on petrol without the country refining the product locally, arguing that removing the subsidy would expose Nigerians to arbitrary pricing.

Taking a cue from the shutdown of companies, following the hike in diesel price, the removal of subsidy on petrol, a Petroleum Expert and Technical Director at Template Design Limited, Bala Zaka, has also argued that removing subsidy will further crash more businesses.