SUBSIDY REMOVAL: WILL THIS GAME EVER END?

I woke up just like many Nigerians to the devastating news of the astronomical increase in the pump price of fuel. It was sudden and shabbily implemented, and this much can be deduced from the hue and cry of Nigerians who had expressed concerns about the new development on the social 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 series of articles. But I do not want to believe the recent fuel hike has anything to with subsidy removal as some had tried to portray it.

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 project the removal of subsidy. In fact, it only replayed a pattern usually employed by the immediate President, Muhammadu Buhari, in jerking up price of fuel during his eight years rule.

In 2016, Buhari administration had adjusted the price of petrol from the N87 per litre it inherited to N145 per litre. The justification for that increase was the removal of subsidy.  The then Minister of State for Petroleum Resources at that time, Ibe Kachicku, 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 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 Buhari, who also held the office of 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. And just like in 2016, the reason for the fuel hike was the removal of subsidy. But the truth, which Nigerians have come to found out, the Buhari government expended more than N11trn to service the same fuel subsidy it had attributed to fuel hike in his eight years in office.

This was 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 an action of removing national or local government controls or rules from a business or other activities. In Financial Dictionary, deregulation means the reduction of 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 anyway related to the removal of subsidy.

 Take a look at the price list for pump price of petrol released by the Nigerian National Petroleum Corporation (NNPC) ltd. Although, some people have contended that the list was only for stations under its operation but the picture I believe they must have missed is that NNPC is the only importer of fuel to Nigeria.

What this simply implies is that the pricing template of the NNPC 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 force 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 and explain 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 turnaround 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 the market force is what determines the price, not a sole importer of the product, as we have seen with the NNPC over the years.

Sarafa Ibrahim, Iwo, Osun State