By Omonigho Kingsley Johnson
The echoes of President Bola Ahmed Tinubu’s declaration, “Subsidy is gone,” still reverberate through the corridors of power and the streets of Nigeria.
This bold proclamation, made during his inaugural address on May 29, 2023, marked the end of an era and the beginning of a new chapter in Nigeria’s economic narrative.
However, the removal of the petroleum subsidy, a policy that has been both a lifeline and a burden, has unleashed a wave of economic hardship and social discontent that cannot be ignored.
A Historical Perspective
The story of petroleum subsidy in Nigeria is as old as the nation’s modern economic history.
Introduced in the 1970s to cushion the impact of global oil price shocks, the subsidy was intended to make fuel affordable for the average Nigerian.
Over the decades, successive governments grappled with the subsidy, balancing its economic benefits against its fiscal burden.
In 1999, as Nigeria transitioned to democratic rule under President Olusegun Obasanjo, the price of petrol was set at N20 per litre. This marked the beginning of a series of price adjustments that would define the nation’s economic landscape.
By 2003, the price had risen to N40 per litre, and by 2007, it stood at N75 per litre. Each increase was met with public outcry and protests, reflecting the deep-seated reliance of Nigerians on subsidized fuel.
President Umaru Musa Yar’Adua reduced the fuel price shortly after assuming office in May 2007. One of his first actions as president was to lower the pump price of petrol from N75 per litre to N65 per litre.
This decision was part of his efforts to alleviate the economic burden on Nigerians and was widely praised by the public.
In 2012, President Goodluck Jonathan increased the petrol price by 116.92% from N65 per liter to N140 per liter, and the opposition led by the current president Bola Tinubu organised an OCCUPY NIGERIA protest to force a reversal.
Predident Buhari met the pump price at N87 per litre and increased it to N195 per litre.
Interestingly, and paradoxically, too, President Buhari was among the organizers of the OCCUPY NIGERIA protests against Goodluck Jonathan!
Today, a litre of petrol popularly called PMS goes as high as N1300 in many parts of the country, and the worst part of it is that the product is as scarce as gold, and nobody has occupied Nigeria!
The Economic Rationale
The economic arguments for subsidy removal are compelling.
Subsidies have been a significant drain on Nigeria’s public finances, costing the government billions of dollars annually.
In 2022 alone, the subsidy bill was estimated at $10 billion, accounting for about 40% of the nation’s revenue. Critics argue that the subsidy primarily benefited the wealthy, who consumed the most fuel, while the poor saw little of its benefits.
Moreover, the subsidy regime was riddled with corruption and inefficiencies. Billions of dollars were lost to fraudulent subsidy claims, and the system incentivized smuggling and black market activities.
Indeed, the former Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, made significant allegations regarding fraudulent activities in the petroleum subsidy regime.
One of the most striking claims he made was that some Nigerian oil marketers were engaging in fraudulent activities by berthing empty ships at sea and submitting false invoices to claim subsidy payments.
Essentially, these marketers would pretend to import fuel, but in reality, no fuel was being brought into the country.
They would then submit invoices for the supposed fuel imports and, with the cooperation of government insiders, receive subsidy payments from the government!
The removal of the subsidy, therefore, was seen as a necessary step to free up resources for critical infrastructure and social services.
The Human Cost
Yet, the economic rationale, however sound, cannot overshadow the human cost of subsidy removal.
The abrupt end to the subsidy has led to a sharp increase in fuel prices, with petrol prices soaring from N195 per litre to N1300 per litre in just a few months of Tinubu’s government.
This has had a cascading effect on the cost of living, driving up prices of goods and services across the board.
Transportation costs have skyrocketed, making it more expensive to commute to work or transport goods.
The cost of food and other essentials has also risen, exacerbating the already high levels of poverty and unemployment.
To paint a picture of how bad the situation really is in Nigeria, a sachet of the popular pure water that used to sell for N5 is now N50!
A bag of rice, Nigeria’s staple food, is now N100,000. For context, that same bag of rice under Goodluck Jonathan’s tenure was N7000!
For the average Nigerian, the impact of the subsidy removal has been both devastating and draining.
According to recent reports, inflation is at its highest rate in nearly two decades, and one in three Nigerians is unemployed.
The Tinubu Administration’s Challenge
President Tinubu’s administration faces the daunting task of managing the fallout from the subsidy removal.
While the decision was necessary to stabilize the economy, its execution has been less than ideal. The suddenness of the policy shift has left many Nigerians struggling to cope with the resulting economic instability.
In his inaugural address, President Tinubu promised that the funds saved from the subsidy removal would be used to improve public infrastructure and social services.
However, the benefits of these investments will take time to materialize, and in the meantime, the pain of adjustment is being felt acutely by the populace.
A Call for Compassionate Governance
The removal of the petroleum subsidy in Nigeria is a classic example of the tension between economic efficiency and social equity.
While the policy is economically justified, its implementation must be handled with compassion and sensitivity to the plight of the poor and vulnerable.
The government must take immediate steps to mitigate the impact of the subsidy removal on the most affected.
This includes providing targeted social safety nets, such as cash transfers and subsidies for essential goods, to help cushion the blow. We have heard news of rice shipments to vulnerable Nigerians, but these shipments only ended up in the warehouses of the rich!
Additionally, efforts must be made to improve public transportation and reduce the cost of living through strategic investments in infrastructure and services.
Conclusion
The pains of petroleum subsidy removal in Nigeria are real and profound. They reflect the broader challenges of managing an economy in transition, balancing the need for fiscal discipline with the imperative of social justice.
As Nigeria navigates this difficult path, it is crucial that the voices of the poor and marginalized are heard and that their needs are addressed with urgency and empathy.
President Tinubu’s declaration that “subsidy is gone” marks a turning point in Nigeria’s economic history.
But it is only the beginning of a long and arduous journey towards a more equitable and sustainable future.
The success of this journey will depend on the government’s ability to manage the transition with wisdom, compassion, and a steadfast commitment to the well-being of all Nigerians.
Johnson writes from Ontario, Canada