As Nigerians Grapple with the Pains of Fuel Subsidy Removal

Last week, the administration of President Bola Tinubu had a foretaste of Nigerians’ unsparing reactions when taken for granted in policy implementation, no matter how beneficial the policy is, with the groundswell of criticisms and anger over the sudden withdrawal of fuel subsidy and the attendant fuel crisis, writes Festus Akanbi

For obvious reasons, the pomp and ceremony that heralded the inauguration of President Bola Tinubu last Monday soon gave way to bewilderment, anger, and frustration by the Nigerian public who began to feel the full weight of the sudden commencement of the fuel subsidy removal, as announced by the president.

Tinubu had in his inaugural address at the Eagle Square on Monday pronounced with finality an end to subsidy, noting that the 2023 Appropriation Act did not provide for petrol subsidy beyond June; the end of the 18-month extension period approved by the Muhammadu Buhari administration for the discontinuance of the subsidy regime. 

New Economic Agenda

Interestingly, the riotous atmosphere in many filling stations and bus stops in major towns and cities appear to have dwarfed discussions over other key economic agenda unveiled by the new president at his inauguration.

This is because, apart from the issue of subsidy removal, Tinubu vowed to tackle poverty and create jobs in bold economic agenda, saying his administration will prioritise job creation, food security, and the eradication of extreme poverty as key aspects of its economic development model.

“We shall remodel our economy to bring about growth and development through job creation, food security, and an end to extreme poverty.

“In our administration, Women and youth will feature prominently.

“Our government will continue to take proactive steps such as championing a credit culture to discourage corruption while strengthening the effectiveness and efficiency of the various anti-corruption agencies,” Tinubu said.

He also declared his government’s decision to unify the exchange rate, replacing the previous multiple exchange rate regime implemented during the administration of former President Buhari by the central bank.

He highlighted the importance of a unified exchange rate and emphasised the need to redirect funds from arbitrage toward meaningful investments. Additionally, he called for a reduction in interest rates, describing the current rates as detrimental to both the people and businesses in Nigeria.

Return of Fuel Crisis

However, signs that the president’s narrative on fuel subsidy removal did not sit down well among the people began to manifest a few hours after the inauguration. There was a spontaneous increase in the prices of petrol which ballooned from N195 to as high as N557, while many marketers chose to hoard the product for fear of reprisals from customers. 

On fuel subsidy removal, analysts observed that what fuelled the state of confusion, anger, and hopelessness among the people was the lack of clarity on the government’s palliative plans, lack of consultation with the organised labour, and the spontaneity of the pricing templates of fuel marketers, including the Nigerian National Petroleum Company Limited, (NNPCL).

As Nigerians continued to keep vigil at fuel stations in endless queues, the Nigerian National Petroleum Company (NNPC) Limited, on Wednesday adjusted the pump price of petrol by nearly 200 per cent, from N195 per litre to between N488 and N557 nationwide.

New Price Regime

NNPC said it had been funding subsidies to the tune of N400 billion monthly. Group Chief Executive Officer of NNPC, Mele Kyari, disclosed that the federal government still owed the firm N2.8 trillion spent on petrol subsidy.

Kyari lamented that since the provision of the N6 trillion in 2022, and N3.7 trillion in 2023, the national oil firm had not received any payment whatsoever from the federation. He said NNPC made the petrol subsidy payments from its cash flow.

According to a schedule issued by the national oil firm, detailing the new rates, petrol prices were adjusted upward from between N189 to N194 per litre to N537 in Abuja and other North-central states.

In Lagos and other South-west states, a litre of petrol now sells for between N488 and N500 per litre. In the South-east, the price will range from N515 to N520, while in the North-west, the price of the product was raised to between N540 and N545. In the North-east, it moved from N199 to between N550 and N557 per litre. For the South-south, petrol is now from N511 to N515 per litre.

On his part, the Executive Secretary of MOMAN, Mr. Clement Isong, explained that with the new petrol marketing regime, MOMAN members would be selling their products based on their cost of purchase. He urged Nigerians to embrace the new petrol marketing regime and reduce their fuel consumption, saying the government should put in place appropriate palliatives to cushion the effect on the most vulnerable citizens.

 However, analysts warned that it would be erroneous to expect fuel prices to hover around N500 based on the NNPCL’s template. According to a Lagos-based fuel marketer, Nigerians should expect a litre of fuel to be around N600 by the time major and independent fuel marketers are ready with their price templates.

Organised Labour Fumes

In the ensuing confusion and anger, the leadership of the Nigerian Labour Congress and the Trade Union Congress were invited for a meeting by the representatives of the federal government on Wednesday. However, the meeting ended in a deadlock with the labour leaders insisting on a return to the statusquo before a meaningful dialogue could begin.

NLC President, Joe Ajaero, in a statement, said the union was worried that Tinubu, despite the ongoing meetings of stakeholders in the oil and gas sector to try to manage the unilateral decision by the government, went ahead to announce a new regime of prices.

He described it as an “ambush”, stating that it runs against the spirit and principles of social dialogue, which remains the best platform available for the resolution of all the issues in the petroleum downstream sector.

One of the arguments put forward by the NLC President was what happens to the budget provision made for fuel subsidy till the end of June this year.  Analysts that spoke on different television channels during the week also raised the point of the budgetary allocations for subsidy till June ending, wondering why the NNPC could at the middle of the road issue a new pricing template as if the subsidy payment ended in May.

The TUC in a statement by its President and Secretary General, Festus Osifo and Nuhu Toro, respectively, warned that it is a joke taken too far, calling on the new administration to give room for proper dialogue with all the stakeholders.

“Accordingly, we hereby demand that President Tinubu should tarry awhile to give room for robust dialogue and consultation and stakeholders engagement just as he opined in his speech, until all issues and questions; and there is a host of them, are amicably considered and resolved. Nigerian Workers and indeed masses must not be made to suffer the inefficiency of successive governments,” the statement said.

 Employers Fret

In the same vein, the Nigerian Employers’ Consultative Association (NECA) has called on the federal government to approach the removal of petrol subsidy strategically to avoid the escalation of inflation and worsening of the already bad socio-economic indicators like employment, and poverty per capita income, among others.

A statement issued by the Director General of NECA, Mr. Adewale-Smatt Oyerinde, warned that if the subsidy withdrawal was not well managed, it could lead to an increase in the prices of goods and services with consequential effects on purchasing power.

 Oyerinde stated, “While it is desirable to remove the fuel subsidy, which in real terms is subsidising inefficiency and corruption, the removal must be systematically and strategically done in order not to further impoverish and worsen the already bad socio-economic indicators, such as employment, poverty per capita income, and many more.

NEITI Vindicated

Despite the brewing protest over the removal of subsidy members of the economic community have continued to pour in commendations for the new administration for bracing the odds to announce the end of a policy that successive administrations could not stop.  

For instance, the Nigeria Extractive Industries Transparency Initiative (NEITI) described the move as a positive development by the administration to decisively implement the findings and recommendations contained in the NEITI reports. 

A statement, signed by Ms Obiageli Onuorah, the Deputy Director/Head of Communications and Stakeholders Management, said a bold step was required to block leakages, grow revenues and advance the ongoing reforms in the oil, gas, and mining industries.

Onuorah recalled that its recommendations for the removal of fuel subsidies have remained a persistent request since 2006 given the agency’s concerns about the huge financial burden that the subsidy regime imposed on the growth of the Nigerian economy over the years.

The Puzzle

Analysts are of the view that the new administration will be able to win the support of the Nigerian people if it can come out clean and explain if there were provisions for fuel subsidy in May and June 2023 as indicated by the immediate previous administration. This is necessary to stave off the impending confrontation with labour and the attendant threats to the economy, which the Tinubu administration promised to turn around.