By Adewole Kehinde
“It might seem hard and impossible, but at the end, you will be glad you took that first step.” London Mond
Fuel subsidy have been in place in Nigeria since the 1970s. It began with the government routinely selling petrol to Nigerians at below-cost prices to minimize the impact of rising global oil prices on Nigerians.
Following the promulgation of the Price Control Act in 1977, fuel subsidies became institutionalized, which made it illegal for some products (including petrol) to be sold above the regulated price. This law was introduced by the Olusegun Obasanjo military regime in order to cushion the effects of the global Great Inflation era of the 1970s, caused by a worldwide increase in energy prices.
Under the provisions of the Petroleum Industry Act (PIA), the subsidy regime vanished on February 17, 2022. The law states that six months after the enactment of the PIA, petroleum products, particularly PMS, must be priced at market rates.
Subsidy payments have threatened the nation’s fiscal position and impacted the government’s ability to fund developmental projects nationwide.
In November 2021, the Federal Government announced its plan to remove the fuel subsidy and replace it with a monthly N5,000 transport grant for poor Nigerians.
But the government later suspended the plan after the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) threatened to embark on mass protests.
The government subsequently said that it would phase out the subsidy regime by the end of the first half of the year.
But in April, the National Economic Council (NEC) suspended the planned removal of subsidy on petroleum products by the end of President Muhammadu Buhari’s administration.
It will be recalled that President Bola Tinubu declared on Monday, in his inaugural address at Eagle Square, Abuja, that there would no longer be a petroleum subsidy regime as it was not sustainable.
“We commend the decision of the outgoing administration in phasing out the petrol subsidy regime, which has increasingly favoured the rich more than the poor. The subsidy can no longer justify its ever-increasing costs in the wake of drying resources,” the president said.
One of the major highlights of the administration of President Bola Ahmed Tinubu has been the suspension of the payment of subsidy on Premium Motor Spirit, otherwise called petrol.
So many critics have been attacking the GCEO of the NNPC Limited, Mall. Mele Kyari, for causing the removal of subsidy on Premium Motor Spirit, otherwise called petrol. They forgot that NNPC is now a commercial entity, and by its new design under the PIA, it can no longer fund the subsidy regime.
Since the May 29, 2023, pronouncement by President Tinubu, a lot of dust has been raised from different quarters: from the uninformed and from the camp of those who benefited, albeit criminally or otherwise, while the subsidy regime held sway.
The majority of these uninformed beneficiaries of subsidy have criticized the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited, Mallam Mele Kyari, as the man behind the subsidy removal, forgetting that the PIA backed the subsidy removal and that President Tinubu, during his presidential campaign, laid emphasis on removing subsidy when voted into office.
However, to the informed, this remains the most courageous move to place the country on the strongest path to its economic recovery.
There is no doubt that subsidy payments have placed a huge economic burden on Nigeria’s economy.
Subsidy removal would free up public funds for more meaningful infrastructure and developmental programmes that will stimulate industrialization, create jobs, and promote economic growth and social prosperity.
It would create a market-reflective downstream, which invariably stimulates more downstream investments, especially in the domestic refining space, thereby creating more jobs, prosperity, and growth.
According to the federal government, subsidy removal would eliminate the unhealthy price arbitrage with neighboring countries, thereby preventing the diversion and smuggling of Premium Motor Spirit outside the nation’s borders, which bleeds Nigeria’s economy, as well as reduce corruption surrounding internal product diversion as many marketers procure Premium Motor Spirit at subsidized, regulated wholesale prices but still sell it at deregulated retail prices.
Subsidy removal will allow the full recovery of upstream revenues, which enables the reinvestment required to grow the nation’s petroleum production and reserves and overall forex earnings.
The removal would also strengthen the Naira as the growth of the Nation’s foreign exchange earnings combined with a reduction in product consumption reduces pressure on forex, thereby strengthening the Naira.
Subsidy removal will also reduce product scarcity by opening market prices to attract more players and creating a more efficient market, thereby reducing fuel scarcity and its adverse effects on the economy.
The removal is also expected to reduce the growing and unsustainable budget deficit and, consequently, the debt burden, creating a more robust economic and sustainable future.
I must commend President Tinubu for the timely palliatives rolled out to cushion the effect of the fuel subsidy removal, namely: the release of over 200,000 Metric Tonnes of grains to families in the 36 States and the Federal Capital Territory, Abuja; Vulnerable students benefit from Conditional Cash Transfers and food distribution; the provision of buses to students’ bodies in all Universities, Polytechnics, and Colleges of Education to ease transportation costs; and the removal of all restrictions on the student loan, which makes it available to any student or household in need.
Among other announced measures are: Cultivation of 500,000 hectares of farmland and all-year-round farming practices remain on course; N200 billion out of the N500 billion approved by the National Assembly will be disbursed as follows: N50 billion for cultivating 150,000 hectares of rice, N50 billion for cultivating 150,000 hectares of maize, N50 billion for cultivating 100,000 hectares of wheat, and N50 billion for cultivating 100,000 hectares of cassava.
Also, the government will invest N75 billion to support the manufacturing sector and N125 billion to energize micro, small, and medium-sized enterprises; An Infrastructure Support Fund for the States will improve healthcare, education, and rural access roads; N100 billion will be invested in 3000 units of 20-seater CNG-fueled buses for mass transit at affordable rates; A new national minimum wage is being negotiated in collaboration with labor unions.
The President said that over a trillion Naira has been saved by removing the fuel subsidy, which will now be used for more beneficial purposes, such as affordable education and student loans.
Blackmail, smear, and tarnishing of the image of the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), Mallam Mele Kyari, will not make President Tinubu reverse the removal of the subsidy.
I urge Nigerians to come together to support the removal of fuel subsidy as it is in line with the PIA and the benefits are greater than we envisaged.
Adewole Kehinde is the publisher of Swift Reporters and can be reached via 08166240846. kennyadewole@gmail.com
