BEVERLY HILLS, April 26, (THEWILL) – The Federal Government in a report admitted recently that fuel subsidy has gone up to N500 billion and the Nigerian National Petroleum Corporation said this would not translate into a hike in the price of Petroleum products in May. CANICE OPARA writes about the implication of this development for the economy.
The word ‘Fuel subsidy removal; no doubt, is not a new lexicon to Nigerians, who see it as a conduit pipe by players in the petroleum industry to fleece the nation. Past administrations in the country found this issue a daunting task, which has remained a mirage despite the efforts of the present government since it was first inaugurated in 2015.
Recently, it was reported that the subsidy price of petrol or Premium Motor Spirit is expected to gulp an estimate of N500bn.
With this, there is the fear by consumers that this might translate into a hike in the pump price of petrol. But the Group Managing Director of NNPC, Mele Kyari, after a closed-door meeting with stakeholders in Abuja recently, doused this tension while assuring that there would be no such increase in the ex-depot price of PMS in May.
“We want to inform oil marketing companies that NNPC will not increase the pump price of PMS in May. I ask Nigerians to go about their normal business nobody should panic in buying the product.”
Kyari, had last month, revealed that the current market price of PMS had risen to N234 per litre, far above the average pump price of N163 per litre across petrol stations in the country, and that NNPC had maintained an ex-depot price of N148/litre since February.
The N148/litre stands, despite the hike in the actual cost of the commodity, hence incurring the subsidy of over N120bn monthly. The question on the lips of many is when will fuel subsidy be over, in view of the fact that the government is not doing enough to fix the four refineries that are down?
It is on record that past governments had at different times decided to stop subsidising fuel. unfortunately, it is disheartening that this hasn’t happened. In January 2012 when the Goodluck Jonathan, attempted to effect that, the move was met with widespread protest by Nigerians.
This move by Nigerians was not unconnected with the fact that the government had not done the needful before embarking on that venture in 2012, such as fixing the refineries, addressing infrastructure decay etc.
For this huge sum of N500 billion to be gulped by fuel subsidy is an indication that the need exists to scrap it and save the money for other projects. Government’s lack of political will to end the subsidy is worrisome. But there is another side to it.
Millions of poor Nigerian artisans use petrol to power their generators, tricycles, and motorcycles as a result of epileptic electricity supply.
Again in March, the government and the International Monetary Fund agreed to implement deregulation of the oil industry downstream sector, which would see it terminate fuel subsidy.
The Minister of State for Petroleum Resources, Timipre Sylva, in September 2020, during an interaction with journalists in Abuja, acknowledged that removing the fuel subsidy would save the government billions of naira and create jobs.
“It is time for Nigerians to face reality and do the right thing. What is deregulation going to do? It is going to free up a lot more money. It will save us up to a trillion (Naira) and more every year”, Sylva said.
If that is the case, what stops the government from removing the subsidy, if not the political will to do so? Or Bit scared of civil unrest in the country? Nigeria subsidises imported fuel due to non-functioning of her four refineries.
Should subsidy be removed, the money freed up could be channeled into other areas that need attention, such as to develop critical infrastructure in education, health, transport and other sectors for the benefit of the ordinary Nigerian.
But if that is not done, the ripple effects would pose great challenges for Nigerians, hardship and other unbearable conditions will be the order of the day, resulting in a high cost of living. Nigeria is already passing through severe challenges, as recently pointed out by the Hon. Minister of Finance, Budget and National Planning, Zainab Ahmed.
“These are very difficult and challenging times, because revenue is low and the demand for expenditures are very high understandably because we have to keep intervening to make sure the COVID-19 pandemic is contained as well as the economic impact it has caused”, Ahmed said.
The hardship, for the poor, has actually started with this revelation. This is a typical example of where the average Nigerian’s problems would stem from: the transferring of it to the poor through the various levels of government.
However, with COVID-19 exposing the economy, it is imperative that the country stops fuel subsidy, put structures on ground and also diversify the economy.
We need to embrace mechanised agriculture, where farmers would be fully engaged to produce needed raw materials for local companies to boost production chain for the manufacturing thereby promoting backward integration.
That way, goods produced in the country can be exported to other African countries, especially Sub-Saharan Africa, by embracing the Africa Continental Free Trade Agreement to build up her national export trade, thereby creating job opportunities.