News Analysis: Planned Removal Of Fuel Subsidy

News Analysis: Planned Removal Of Fuel Subsidy

It is no longer news that President Goodluck Jonathan’s administration is hell-bent on removing the remaining part of fuel subsidy. The fireworks to that effect can be felt in many advertorials that have of recent filtered the media, highlighting the need for total removal of fuel subsidy. This time around, the government is not mincing words on the issue or hiding under some cover.

It is not pretending that the fuel subsidy is going to be removed. Government is doing everything possible to sway public opinion, on the matter, to its side. Government had early last year removed the fuel subsidy and raised the price of a litre of petrol from N65 to N141. After weeklong protests by Nigerians, government bowed to public pressure not to remove the subsidy entirely in view of perceived hardship such action would unleash on the populace, especially where there was absence of palliative and coupled with the fact that the government took the people by surprise.

As a stop-gap measure, the government after much hesitation, partially removed the subsidy and reduced petrol price from N141 to N97 per litre. The public grudgingly accepted government’s policy U-turn even though it was not a return to status quo ante the people had wanted they heaped much of their hope on government’s planned palliatives to cushion the effects the partial removal of the subsidy would have on the masses.

Unfortunately, most of the promised palliatives such as massive job creation and other goodies did not get out of government’s drawing board and the same government is again touting with the idea of removing what remained of the subsidy, which the people thought is the only benefit they derive from the nation’s naturally-endowed petrol-dollar largesse.

An indication that Abuja is not comfortable with the current fuel subsidy regime came last week when Jonathan harped that the government would still remove fuel subsidy. However, unlike what happened last year when the subsidy was removed without consultation, the government said that it would first discuss the proposal with Nigerians before removing the subsidy. That is a clear departure from the past. The president, who revealed this in Lagos at the Nigeria Summit, said: “We cannot continue to waste resources meant for a greater number of Nigerians to subsidize the affluent middle class, who are the main beneficiaries.

We believe that as we progress, government is going to continue to enlighten Nigerians on the need to remove the fuel subsidy.” As explained by the Petroleum Product Pricing Regulatory Agency’s (PPPRA), the landing cost of a litre of petrol is currently N131.10, with total delivering distribution margins of N15.49, thus bringing the total cost to N146.59. According to the agency, if the subsidy is eventually removed, Nigerians will pay not less than N146.59 per litre of petrol.

Government’s argument for insisting on total removal of subsidy is that a tiny percentage of Nigerians, those the government called the cabal, are the ones hugely profiting from the subsidy largesse and that the only way to stop such financial malfeasance is to totally abolish subsidy from the nation’s economic lexicon. Also, the government has argued that since we are surrounded by neighbouring West African countries that sell petrol at higher price than Nigeria, our current low price of the commodity will always encourage smuggling of the product along our numerous porous borders.

Government also said that removal of the subsidy will attract more investment in the downstream oil sector and thereby boost employment and the economy. While government’s arguments may sound convincing, the Nigerian people have a pathetic tale and manifold frustrations to express over many years of government’s fuel price hike based on untenable subsidy regimes and the failure by government to deliver on its promises.

The people’s seeming docility might have further encouraged every Nigerian government to tamper with the prices of petroleum products each time the regime finds itself in an economic tight corner. The public is not convinced that the people that constitute the cabal are more powerful than the government. They believe that since government is aware of the members of this cabal, it can muster enough political will to stop the fuel subsidy abuses by getting hold of them through diligent prosecution of corruption cases, especially oil-related corruption.

They are not happy that almost all the nation’s old refineries are not working as they should and plans to build new ones are still foot-dragging if not thwarted by officialdom. Critics of government’s position on fuel subsidy are quick to point out that even the handling of the fuel subsidy probe panel’s report and government’s body language over some aspects of the report is an indication that there is more to the fuel subsidy regime than meets the eye.

It appears government wants to shield some marketers and at the same time wants to punish some. This, the critics hold, amounts to double standards. They are of the view that government is using the cabal as a cover to remove the fuel subsidy which the masses claim is the only benefit they derive from Nigeria’s oil. Moreover, the government does not give any form of social security to its citizens. Also, over 70 percent of Nigerians are living below poverty line at less than $1 dollar per day while there is massive unemployment in the land.

Now that government says that it will engage Nigerians in a dialogue over the planned fuel subsidy removal, let it ensure that all segments of the nation’s social-economic strata are well represented in all the deliberations to arrive at amicable solution on the removal of fuel subsidy. Government should strike a balance between its position and that of the public.

The public, including the labour, lawyers, trade unions and the civil society groups should be carried along in the subsidy removal talks. Government should in all dealings with the people remember that the first reason for the existence of any government is the welfare of the people and security of lives and property of its citizens. Nigerian government should not abdicate from this primary duty of government to her citizens.


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