A Fuel Subsidy Removal That Benefits Citizens

• Adeolu Adekola

President Bola Ahmed Tinubu’s inaugural speech has gone down in history as one that hit the ground and got Nigerians running. The now infamous phrase, “Fuel subsidy is gone,” immediately caused reactions as petrol retailers allegedly refused to sell in a bid to maximise profit from their current stock, based on the announcement.

It caused artificial scarcity as they would rather close shop and not sell at the previously regulated price. When the Nigerian National Petroleum Company (NNPC) Limited, which is responsible for importing petrol, adjusted the pump price of its retail outlets upwards and circulated a statement, the action signalled the implementation of the subsidy removal, and other retailers followed suit.

As expected, costs of transportation, goods and other services have increased with the realities of the increase in the price of petrol. As the debate continues, it is important that the current administration actively reviews its decision with accompanying gestures.

The fuel subsidy discourse is quite technical and multilayered, and getting all the necessary angles is very important. The subsidy removal cannot be subjected to fiscal perspectives alone based on the government’s inability to pay the amount quoted by oil marketers. The decision requires a delicate balancing act that also involves actions addressing citizens’ concerns.

What Has Changed Between the #OccupyNigeria 2012 Protests and 2023 Subsidy Removal?

In the words of Thomas Manson, “The past is behind, learn from it. The future is ahead, prepare for it. The present is here, live it.” There is a path dependency on the fuel subsidy debate, and attempts to sidestep it means that the federal government is not sincere about its removal. It is why the phrase from the inauguration speech could have been avoided without a holistic plan accompanying it.

The 2012 fuel subsidy protest was unarguably one that shook the country the most in that decade. It is important to remember that cutting government waste was one of the demands during the 2012 protests rather than passing the buck to citizens. And in 2023, that question remains unanswered.

From several missing monies in the last administration to the bogus figures quoted as security votes for state governors, to ballooning annual budgets with repeated line items, the Nigerian Government is yet to show fiscal discipline worthy of heaping an added inflation burden on Nigerians. Take the National Assembly for example, their budget has climbed steadily over the years, and its spending lacks transparency. From 115 billion naira in 2016 to 125 billion in 2017 and 2018, 128 billion in 2019, 115.2 billion in 2020, 134 billion in 2021 to 139 billion and 228.1 billion in 2022 and 2023 respectively, the National Assembly spending over a trillion naira under President Buhari is a bitter pill. With the country’s minimum wage at 30,000 naira monthly, it is insensitive for outgoing members of the 9^th Assembly to receive a severance pay package totalling 30 billion naira for serving for only 4 years.

Since 2013, EiE Nigeria has advocated for a more accountable and transparent National Assembly. In 2014, #OpenNASS was coined with BudgIT to demand that the breakdown of the National Assembly’s budget is made public. It happened only once in 2017, and it was easy to see that the 125 billion naira budget contained a duplication of items, repurchase of already existing things and over-blotted procurement costs compared to what is obtainable in the free market.

 In addition, BudgIT identified 460 duplicated projects in the 2022 federal budget to the tune of 378.9 billion naira, while analysis of the 2023 version shows that over 112 billion naira was allocated to agencies outside their mandate. These are multiple layers of government waste that the federal government has turned a deaf ear to. So, what has changed between the #OccupyNigeria 2012 protests and the 2023 subsidy removal? Absolutely nothing!

Gaps in Building Trust Through Social Programmes

In 2012, an ad-hoc committee to verify and determine the actual subsidy requirements and monitor the implementation of the subsidy regime in Nigeria made a presentation to the National Assembly and quoted figures that the federal government denied. The Senate committee formed in 2015 to review the Subsidy Reinvestment and Empowerment Programme (SURE-P) set up to manage the subsidy savings post-Occupy Nigeria revealed over 500 billion naira could not be accounted for. No one has been held accountable.

Based on a recent scorecard, the National Social Investment Programme (NSIP) has reached 15 million people, with nearly 1.5 trillion naira spent between 2016 and 2022. What the programmes have failed to do is to lift a sizable number of the population out of poverty, with released figures by the National Bureau of Statistics (NBS) in November 2022 stating that 63% of persons living in Nigeria (133 million people) are multidimensionally poor.

Heaping the burden of the subsidy removal without adequately providing proactive short, mid, and long-term interventions in transportation and other social services to cushion the effect is more than ever, a very callous act. According to Gbenga Shadare, “Nigeria’s political leadership has struggled to improve the social contract and appeared inept at addressing societal challenges.”

A Delicate Balancing Act

Arguably, there is consensus that fuel subsidy payments must be discontinued, primarily due to unverifiable subsidy claims by oil marketers, which have driven up the subsidy costs. Two videos making the rounds of erstwhile Finance Minister, Dr. Ngozi Okonjo Iweala, and the former CBN Governor, Sanusi Lamido Sanusi, state this fact.

The recent policy developments around fuel subsidy removal highlight a crucial lesson for policymakers – the importance of effective policy communication. Properly framing and communicating policy statements can prevent panic and confusion. While the previous administration had already announced an end to fuel subsidy by June 2023 in the budget provision, the lack of a robust policy communication framework contributed to the prevailing apprehension.

BudgIT’s recent policy brief advocating for a phased approach to fuel subsidy removal in Nigeria holds considerable merit. As the country grapples with record-high inflation and an alarming projected unemployment rate of 37% in 2023, it is evident that simply removing the subsidy is insufficient. Unfortunately, the adverse effect on the well-being of Nigerians was not treated with utmost importance. What might this indicate of how this administration plans to treat citizens?

It brings attention to the recent announcement of an $800 million loan approved by the World Bank for cash transfers to 50 million Nigerians, as post-subsidy removal palliative. Urgent answers are needed regarding the allocation and utilisation of these funds. The National Assembly must rise to the occasion, hold a public hearing, and ensure transparency in the process of addressing concerns that the loan may be misappropriated for consumption rather than strategic investments. The National Assembly’s failure to demand accountability on the ways and means securitization is a recent example that raises concerns about their independence. Lessons learned from implementing the National Social Investment Program (NSIP) since 2016 and COVID-19 palliative distribution in 2020 must be incorporated to ensure the judicious utilisation of these funds.

Some recommendations on cushioning the impact of fuel subsidy removal are as follows:

1. Restructure the NSIP to align with the Multidimensional Poverty Index (MPI). India’s successful approach provides valuable insights, as it witnessed the alleviation of 415 million people from poverty between 2005 – 2006 and 2019 – 2021, significantly reducing its multidimensionally poor population from 55% to 16% within 15 years.
2. Devolve the National Home-Grown School Feeding Program (NHGSFP) to states through matching grants, akin to the Universal Basic Education (UBE) funding. This would expand its reach to more children in rural communities, enhancing school enrollment and completion rates.
3. Widen the National Social Register (NSR) and integrate it into a holistic national identity database to enable the conversion of conditional cash transfers into comprehensive out-of-work benefits.
4.  Introduce a child care benefit payment system for two children per household, tied to a harmonised tax structure and the national identity database. This could further alleviate poverty, particularly among low-income earners within the monthly minimum wage bracket.
5. Extend health insurance coverage to households on the NSR as this would improve access to quality healthcare through public and private hospitals.

Implementing these interventions could potentially reduce multidimensional poverty figures by 44%, as estimated by the MPI.

Summarily, ending fuel subsidy without addressing the fundamentals around rent-seeking and curbing other corrupt tendencies within the system is not only a lazy and insensitive approach, it also does not build trust. It demands transparent and accountable utilisation of funds, restructuring social programs to address multidimensional poverty, and a comprehensive approach to combat corruption and rent-seeking.

Through prudent policymaking, effective communication, and a genuine commitment to reform, Nigeria can navigate this critical transition period and build a more equitable and prosperous future for its citizens.

Adeolu Adekola is a Policy and Development Analyst working on accountability in governance, civic engagement and investigative journalism. He is the Project Manager at Open Climate Reporting Initiative (OCRI) of the Centre for Investigative Journalism, London.