FUEL SUBSIDY: PRESIDENT TINUBU’S QUICK BAPTISM

The removal of the subsidy presents an opportunity for comprehensive economic transformation, argues Joshua J. Omojuwa

The most unbiased reaction to President Bola Tinubu’s inaugural speech came from the markets; the stock market did a record rally – its highest jump after an inaugural speech by an elected Nigerian president – whilst Nigeria’s dollar bonds made jumps of their own. In clear terms, both reactions were reflective of the president’s commitment to a more sophisticated, diversified and expansive economy. However, one bit of the speech has since gotten more attention than every other part, that the fuel subsidy is gone. Considering that these subsidies have been around since the 1970s, no one ought to be shocked that it was always going to be a tough ask expecting Nigerians to immediately get over our addiction to fuel subsidies.

Thankfully, all the major presidential candidates committed to its removal. Only one of them was always going to take the decision as president and also deal with the attendant socio-economic and political outcomes. More than at any other time since these subsidies became a staple of the Nigerian economy, there is a national consensus on their removal. The issue was always going to be when and how? The immediate past administration set the ball rolling, the new administration simply committed to the timeline.

There is no scenario in which this action could take place without controversy or challenges. It is essential to acknowledge that the removal of the fuel subsidy will not come without resistance. There are vested interests that have profited from the subsidy regime and will vehemently oppose its removal. These elements may resort to creating chaos, sabotaging government efforts, or manipulating public sentiment to pressure the government into reversing its decision. Therefore, it falls upon the government to remain steadfast in its commitment to the removal of the subsidy and take measures to counteract any attempts to derail the process.

However, it is also important to recognize that the removal of the fuel subsidy will inevitably cause shockwaves throughout the economy. The subsidy has been in place for several decades, and its elimination will undoubtedly have immediate and far-reaching effects. Fuel prices will increase, which will have a direct impact on transportation costs, commodity prices, and overall inflation. While the shock cannot be entirely avoided, steps can be taken to mitigate its effects, particularly on the most vulnerable segments of society, such as the poor.

The fuel subsidy regime has long been plagued by corruption and mismanagement. Over the years, there have been numerous cases of fraud and embezzlement related to subsidy payments. These practices have not only drained the nation’s resources but also undermined the effectiveness of the subsidy in benefiting the masses. As it gets phased out, it is imperative to address these corrupt practices and hold those responsible accountable. The end of fuel subsidy should not close the door on justice.

In the deregulated regime, with the likelihood of even more importers and marketers, one crucial aspect that requires attention is the management of import quality post-deregulation. With the removal of fuel subsidy, the market will be open to competition, allowing various players to import and distribute petroleum products. To ensure the quality and standardization of these imports, robust regulatory mechanisms should be put in place. Regular inspections, quality control measures, and strict adherence to international standards will be essential to prevent the influx of substandard products into the market.

Beyond the immediate challenges and concerns, the removal of the fuel subsidy presents an opportunity for comprehensive economic transformation. It is imperative to view this decision as part of a broader strategy to diversify the Nigerian economy and reduce its dependence on oil revenue. President Tinubu’s administration should prioritize investments in sectors such as agriculture, manufacturing, and technology to stimulate economic growth, create employment opportunities, and foster sustainable development.

To facilitate this diversification process, the government must create an enabling environment for businesses to thrive. This includes implementing favorable policies, improving infrastructure, streamlining regulatory processes, and providing access to finance and technical expertise. By nurturing a conducive business environment, the government can attract both domestic and foreign investments, which will contribute to the growth and development of non-oil sectors.

The removal of the fuel subsidy also offers an opportunity to address environmental concerns and promote sustainable practices. By discouraging excessive fuel consumption and promoting alternative energy sources, such as renewable energy, the government can reduce carbon emissions and mitigate the adverse effects of climate change. This could involve the implementation of incentives for renewable energy investments, the development of clean energy infrastructure, and the promotion of energy-efficient practices.

Furthermore, the subsidy removal should be accompanied by targeted social welfare programs to alleviate the immediate impact on vulnerable populations. The government should design and implement measures that provide support to low-income individuals and marginalized communities.

To capitalize on the positive momentum generated elsewhere by the president’s inaugural speech, the government should continue to communicate its economic reform agenda effectively. Public awareness campaigns should be launched to educate the public about the reasons behind the subsidy removal, its long-term benefits, and the accompanying measures being taken to mitigate its impact. Transparent and regular communication will foster trust and understanding among the populace, minimizing resistance and promoting citizen engagement in the reform process. The government cannot afford to assume citizens know and understand why the fuel subsidy had to go. Public servants have not committed to making any sacrifices to send any message on austerity home, for example.

In conclusion, the removal of the fuel subsidy is a critical step towards economic transformation and sustainable development. While challenges and controversies may arise, the government’s proactive approach and comprehensive strategies aim to ensure a smooth transition and positive outcomes for all Nigerians. By addressing corruption, improving import quality management, investing in transportation infrastructure, reducing wastage in government, diversifying the economy, and implementing targeted social welfare programs, the government can navigate the complexities associated with the subsidy removal and pave the way for a more prosperous and inclusive future. This is the time to do this, there won’t be a better time to for this administration.

Omojuwa is chief strategist, Alpha Reach and author, Digital Wealth Book