Although there was no official announcement on Wednesday of the full deregulation of the downstream oil sector, what had become clear over the years was that the fuel subsidy regime was no longer sustainable.
The state-owned Nigerian National Petroleum Company Limited (NNPC) is said to be owing its international petrol suppliers as much as $6.8 billion. The national oil company, after months of denial, recently admitted owing huge debts without mentioning the actual figure.
Several committees, including the Presidential Committee on Verification and Reconciliation of Fuel Subsidy Payments, led by Mr. Aigboje Aig-Imoukhuede, revealed that in 2011, 197 subsidy transactions worth N232 billion were illegitimate.
A previous audit by Price Waterhouse Coopers had also indicated that fuel subsidy cost Nigeria almost $10 billion between January 2012 and July 2013. In fact, as of 2023, it was obvious that retaining petrol subsidy would crash the Nigerian economy.
So, in some way, the Bola Ahmed Tinubu administration must be supported to drive these reforms to logical conclusion. After all, it is often said that ‘No Pain, No Gain’.
Nigeria’s spending on its opaque petrol subsidy regime had become much bigger than the budget of several ministries. So, If things work as planned, the full removal of the subsidy is expected to free funds which can be channelled to the provision of infrastructure like roads, education, health service, power and security. Besides, the creation of jobs should also be a priority to the government.
While there is no denying that times are hard and the current situation is affecting Nigerians negatively, it may also make sense to be patient with the government while it tries to sort out this decades-long mess.
Aside freeing up huge amounts hitherto paid on subsidy to fund other sectors, the total removal of subsidy is also expected to reduce smuggling of fuel to neighbouring countries considerably.
With the new deregulated system, it must be noted that prices will not always continue to rise, but respond to market forces. For instance when crude oil prices fall and other variables change, this should also impact pump prices in a way that will favour consumers.
Some of the gains of the full subsidy removal may include reduced government borrowing, creation of jobs, strengthening of the exchange rate, curbing overdependence on imported petrol and incentivising domestic refineries to produce.
Although it comes with temporary pains, the decision of government to remove fuel subsidy after decades of its retention and its attendant negative impact on the economy, must therefore be supported to succeed.
But while at it, what the Nigerian people must do is to hold government at all levels accountable and keep an eagle its expenditures to ensure prudent use of resources.
Emmanuel Addeh
Follow us on:
