Implications and Alternatives to Fuel Subsidy Removal in Nigeria

A no bi economist at ol. But I know that there are very serious social-economic implications of the removal of fuel subsidy on Nigerians. Any Nigerian who thinks seriously of these implications would naturally advocate caution or patience in taking such rather brash decision for the removal the subsidy on PMS, a product the government claims it subsidized by over 100 percent.

Now since the government says it consulted widely on the matter, not too many of us will ever get to find out the caliber of those the government actually consulted. That therefore leaves to guess that the government only locally consulted its friends, advisers, ministers, governors, key members of the PDP and such international friends as the IMF and the world bank while forgetting to consult with the critical mass of Nigerians: students, workers, artisans, traders, transporters, professionals and the unemployed who if there were ever consulted or considered were of minority consequence in their thinking.

Be that as it may, let examine the issues from the basics. Given that subsidy is any money that a government pays to support certain economic sectors, which if not put in place would have disasterous consequences on that sector and/or other sectors. The subsidy on petroleum is not just a simple stand alone issue but one that is complex and critical to driving the entire manufacturing, construction, agricultural and transportation industry, as well as for alternative electric power supply to homes and industry. Such critical sector which controls the entire economic and social activities in the country is a sensitive one that cannot be toiled with without grave consequences on the entire Nigerian population.

Just a few days ago, my wife went to the market with our devalued and very meager resources that have not changed in a long time whether or not government pays the minimum wage or not, since we both work in the private sector. And we were startled at the way prices have skyrocketed since the First of January. The prices of both vegetables and staples have gone up from as little as 50 percent for some items to as much as 150 percent for some other items. Now you can only imagine how millions of families who earn far below the now irrelevant recently-raised minimum wage would legitimately survive in the country, as everything from food to transport and to housing have become too expensive for the poor.

No bi tode govment stat to de tok of sobsidi fo Naijiria. The argument whether to apply or remove the subsidy on petroleum products in Nigeria has been on since the 1980s. Now if the removal of subsidy is allowed, it will be the single biggest cause of inflation in Nigeria in the last twenty years, with figures spiraling from 50 to 150 percent. This would definitely further reduce the already sterile buying power of at least 80 percent of Nigerians. And salaries would become meaningless as food, transportation and housing would become overly expensive.  Thus the removal of fuel subsidy would in any case, at this time, result in untold hardship and heightened insecurity in country as unemployment, prostitution, armed robbery, militancy and terrorism may scale-up out of control across the country.

Dem de tok se Naijirians na tof pipol, se dem go kop.   How would the majority of Nigerians cope with such drastic, ill timed inflation-inducing decision of a minority of  Nigerians who are bent on delivering the dividends of democracy on their own terms without due regard for the opinions of the electorate or the critical mass of Nigerians.  

While access to and cost of PMS may seem easier for Nigerians closest the depot or product entry points who may buy the product for as low as N 130 per litre it may definitely be tougher for Nigerians living far hinterland in places around the middle-belt and the north who may buy the product for around N 250 per litre. People feel around the length and breath of this country irrespective oof religious, cultural or political affiliation

Some people even argue that the prices of petroleum products have not been increased in the last five years and so the current removal of subsidy is well-timed. But what they fail to see is how the stability of the pricing of the product in the last five years has helped to balance the big divide between the rich and the poor, and has certainly helped the poor to create micro-wealth in such micro-holdings as haircutting, hairdressing, vulcanizing, motor-cycling, food milling etc.


Hence, we the people need to remind this government that we overwhelmingly voted for that we do not want the removal of subsidy at this time. Because when the government first did so in the past and created PTF, they did quite some reasonable projects and plenty of jibiti with our common the funds. They never fixed the refineries then and they plunged us deeper into this current problem. How can we trust that the kind of people around this government would not betray our trust when they get hold of the proposed massive pool of funds that would be created to support infrastructural development and maintenance in Nigeria?  

It is seriously doubtful whether that the same government that has failed in its promise of delivering improved and stable electricity would ever succeed in fixing our roads and other infrastructure with the removal of the subsidy on PMS.

Again, the government is also saying that the removal of subsidy will help quell the sharp practices in the industry.  Abeg mek sombodi tel Jonatan se dem no de trowe omomo wit di wota we dem tek baf am. Mek govment tok di ril trut fo dis mata. No bi sobsidi bi awa problem atol o, na koropshon. It seem this government is too afraid to check corruption among its ranks especially in the petroleum and power sectors where nothing reasonable has been achieved to improve the lot of Nigerians in the last thirty years.

So we need to query why this government is insisting on the removal of petroleum subsidy as the hard-way-but-only-way option that is capable of derailing the lives of millions of Nigerians. If the government says it is doing this because of its need for the much needed development fund required for the delivery of the elusive dividends of democracy to Nigerians, then the government needs to look elsewhere.

And in my opinion, taxation offers the best elsewhere option. Take for instance; if the government increases taxation on generators, tobacco, imported beverages, new motor-vehicles and many prestige goods, it would be able to generate a significant part of the much-needed development fund. In addition, the government must be willing to cut down on the allowances of political office holders. This would also generate a significant part of the much-needed development fund. And if a special tax is placed on citizens earning gross salary of say 200 thousand and above, another significant part of the much-needed development fund would be generated.

I think it makes good sense that if the government is insisting on the removal of petroleum subsidy as the only option, then Nigerian must ask in return for at least stable and improved electricity in Nigeria, efficient rail transport system and fixing of all our refineries as the first step before a total or a phased removal of subsidy can be agreed upon.  

Naijiria na wi oun. We must embrace change. But if the change is coming at the cost a murderous inflation and the threat to national security we must reject such change in total. Na tru se wan man no de fit get sens finish. So if want to make serious progress on this issue we must listen to all sides and forge a common solution.

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Hello! I am happy to read this. Mata plenti fo graund. Wi pre mek di tin end wel.

It is important we all come the stark reality of paying for the true value of the product we use.  I agree with you and every other Nigerian that the impact is going to be harsh for sometime.  I also agree that the removal was ill-timed, but for once let us face reality.  Removal of subsidy will provide a level playing ground for investors in the down-stream sector.  You can agree with me that all along government has been the only player in the down-stream thus determining the pump price of petroleum products.  But with this deregulation, other players will come in and establish refineries, create job opportunities and in view of the envisaged competition from this deregulation, prices will come down on the long run.  Let us not be deceived by the antics of labour, who are always clamouring over little things even when they are not only ones affected.  Nigerians will surely reap the benefits of this deregulation in the long run and like a woman in labour who forgets her pains immediately the child is born, Nigerians will soon forget the pains of today because of the joy of tomorrow.


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