By Moses Akarhan
Between February and June next year, the Federal Government would remove fuel subsidy and replace it with a N5000 transport grant for the poorest Nigerians as a cushioning measure. This policy was made public recently by the Minister of Finance, Budget and National Planning, Zainab Amed, at the launch of the World Bank Nigeria Development Update (NDU). The Minister is quoted in the media as saying that the grant will go to about 20 to 40 million Nigerians who make up the poorest population of the country, adding that the final number of the beneficiaries will depend on the resources available after the removal of the fuel subsidy.
Corroborating the minister’s statement, Malam Mele Kyari, Group Managing Director and Chief Executive Officer of Nigerian National Petroleum Company Limited is also quoted in the media as saying the law provides that by the end of February 2022, the nation should be out of the subsidy regime. “There will be no provision for it legally in our system but I am also sure you will appreciate that government has a bigger social responsibility to cater for the ordinary and therefore engage in a process that will ensure that we exit in the most subtle and easy manner”.
The decision to remove fuel subsidy has triggered divergent views from Nigerians. While the proponents of the removal are emphasizing on the benefits that will accrue to the country, those opposed to the policy see it as a way of further heightening the hardship of the most vulnerable population of the country.
In a related manner, different opinions have trailed the proposed transport grant to the poorest Nigerians as those opposed to the idea wonder the criteria that would be used to select and share the said money and also see it as been more expensive than the fuel subsidy which the country is running away from and warned the leaders not to be penny wise and pound foolish.
The implication of this policy is that the price of fuel will definitely rise above the imagination of the citizens. The price of Premium Motor Spirit (PMS), better known as Petrol, currently hovers around N162/N163 per litre.
Mele Kyari, group managing director of the Nigerian National Petroleum Corporation (NNPC), had said that the cost of petrol should be N256 per litre at filling stations without subsidy according to media reports.
The Department of Petroleum Resources (DPR) says the pump price of petrol in Nigeria may rise to N1, 000 per litre when the petrol subsidy regime ends without an alternative energy source. Sarki Auwalu, DPR director is quoted in the media as acknowledging that Nigeria was spending so much on petrol subsidy.
He said eliminating it would require making alternative fuel available to Nigerians and that failure to do that will plunge Nigerians into paying higher petrol prices when subsidy is removed. “So, to eliminate subsidy, they don’t call it subsidy anymore now, it’s under-recovery of purchase. So, to eliminate under-recovery, what you need is alternative fuel. Without an alternative, you will subject people to higher prices and that is why we go for price freedom.”
One of the supporters of the policy who is also the Governor of Kaduna State, Malam Nasir El-Rufai, is quoted in the media as saying that state governments are ready to support the Federal Government in the elimination of fuel subsidy regime. He said that if the regime of fuel subsidy was not eliminated, 35 out of the 36 states of the federation may not be able to pay salaries in 2022.
According to him, kerosene which matters most to the masses had been regulated without any hitches, while diesel which was most important to transporters had also been regulated for a long time. “This hullabaloo about petrol is something that we must as a country have a conversation and agree that it has to end. We cannot continue to provide petroleum to our neighbouring countries, which is what we are doing. Why are we doing this? For whom are we doing it? Who is the beneficiary? Which is the cabal that is the beneficiary of this and why should they hold this country to ransom and bankrupt the Nigerian economy?
“Right now, we are losing N250 billion a month and this has to end. State governments are committed to supporting the Federal Government on this.
“We do our bit, engage stakeholders and put the facts on the table so that everyone understands the danger the country is in if the subsidy continues, as well as the benefits that will accrue.
“Not only to the budgets of the states and their capacity to deliver social services but also what will go directly to the pockets of the poorest Nigerians that will bear the brunt of any withdrawal of subsidy”.
Mr. Marco Hernandez, World Bank Lead Economist for Nigeria is also quoted in the media as saying, while in 2022 the Federal Government plans to spend about N3, 000 per person for health, the cost of petrol subsidy for 2022 could reach N13, 000 per person. “Not only is the petrol subsidy costly but it mainly benefits richer households.
“Nigeria has the opportunity to establish a “compact” with citizens that eliminates the subsidy and uses the savings to provide targeted cash transfers to lower-income-households, invest in job-creating programmes and improve its fiscal position.”
The Independent Petroleum Marketers Association of Nigeria (IPMAN) has backed the Federal Government’s plan to remove subsidy on Premium Motor Spirit (PMS) also known as petrol by 2022. IPMAN’s President, Mr. Chinedu Okoronkwo, told the media recently in Lagos that the Petroleum Industry Act (PIA) signed into law by President Muhammadu Buhari on Aug. 16 had no provision for subsidy. “We, as marketers have always advised the government to remove petrol subsidy because it is not in the interest of development of the downstream sector.
“We welcome the decision of the government to stop subsidizing petrol by 2022 and we are hoping it will attract more investments to the sector, especially with the passage of PIA.
“What we want is that a level playing field be provided for everyone in the sector to encourage competition once the subsidy is removed.”
He, however, advised the government to reinvest the subsidy savings in critical areas such as healthcare, education, agriculture and other sectors that would increase revenue accruing to the country.
Also, Mr. Tunji Oyebanji, immediate-past President, Major Oil Marketers Association of Nigeria (MOMAN), is quoted in the media as saying continued subsidizing of petrol was not sustainable in light of current economic realities. Oyebanji, who is the Managing Director of 11 Plc, however, faulted the plan to replace the subsidy with cash transfer to Nigerians due to lack of a reliable database in the country. “In my personal opinion, I am of the view that such funds should be channeled to areas like education and mass transportation that would be accessible to ordinary Nigerians”.
An oil and gas expert, Mr Wilson Opuwei, said the conversation about fuel subsidy in Nigeria should have been a thing of the past because it was an obvious wastage of the nation’s resources. Opuwei, who is the Chief Executive Officer of Dateline Energy Services Ltd., is quoted in the media as saying that the elites were the major beneficiaries of the fuel subsidy regime. “We should let market forces determine the price of petrol and other products, not government dolling out subsidies with funds that we don’t even have. What government should be doing is to create enabling environment for businesses to thrive, and once Nigerians are economically empowered, we will not be having this debate on petrol subsidy.”
However, in a contrasting view, the National Association of Nigeria Students (NANS) recently warned the Federal Government against removing subsidies on petroleum products. Addressing journalists in Abuja, NANS President, Adedayo Asefon said the Federal Government embarking on such a decision will further heighten the hardship in the country.
The students’ body also rejected government’s plan to pay N5, 000 transport allowances to 40 million Nigerians to cushion the effect of soaring fuel prices. “Nigeria will be shut down should the Federal Government attempt to remove the fuel subsidy as allegedly being proposed,” Asefon said.
“It is merely an attempt to add a new dimension of economic woes upon Nigerians through this removal of fuel subsidy.
“We wish to state further that before Federal Government can take any decision on the removal of subsidy, it must first demonstrate goodwill by ensuring that the NNPC makes the four refineries we have in this country work at full capacity to determine the exact cost of refining the products in the country.
“Nigeria cannot continue to use this cause of the implication of the petrol as the benchmark for determining the appropriate price of the products.”
The Chairman, Nigeria Labour Congress (NLC), Nasarawa State, Comrade Yusuf Iya is also quoted in the media as describing the plan as most unfortunate and said it will also spark an increase in prices of other commodities in the market. “I will describe that pronouncement as unfortunate and will draw the attention of the government to the simple fact that increase in the price of fuel is what will trigger prices of all commodities in the market. So the attempt to increase the price of petrol may rather increase the hardship of the common man and this is something that we produce here in Nigeria.
“Why is it being sold at an exorbitant price to the citizens? So as a union, we are going to vehemently reject it and stand firm to make sure that this does not become a reality because it will cause hike in the prices of other things such as transportation, food, hospital bills, among others because all these things are dependent on price of petrol. We already have our plan. We have held several meetings at the headquarters of the Nigeria Labour Congress (NLC) on what will be our action when it eventually happens but we will not disclose until when it happens.
“I therefore call on the government to reverse the decision to increase the price of petrol because the masses are already suffering and if this is actualized, it will further impoverish the poor masses. So I am calling on the government to have a rethink on the decision so that we will not have any industrial upheaval or any issue that will take us to the street to demonstrate.” Iya stated.
The leadership of the Nigerian Bar Association (NBA) in Benue State warned that the planned increase will further aggravate the difficulties faced by many Nigerians. The Makurdi Branch Chairman of Nigerian Bar Association (NBA), Justine Gbagir Esq, is quoted in the media as saying Nigerian leaders are being insensitive to the plight of the citizenry.
According to Gbagir, the rulers are gradually pushing the country to a dangerous point where a revolution is possible if government policies are not urgently geared towards making life easy for the generality of the people. “The issue of increments in the price of not just fuel but also cooking gas is a very unfortunate development. I think the leaders are been insensitive to the plight of Nigerians. And they are gradually pushing Nigeria where there will be a revolution in this country. In an ideal society, government gets from the rich to take care of the less privileged. Government policies are always geared towards having an enabling environment where all the citizens will live responsible and reasonable lives.
“God has blessed Nigeria with natural resources and petroleum is one of them and because petroleum is a force that drives in the Nigerian economy, it determines a lot of things. When there is an increment in fuel price, it affects all other aspects of the economy. So government needs to be mindful of that fact. I believe government has a lot of other things to generate revenue apart from petroleum.
“Looking at the situation here in Benue, once there is increase in the price of fuel, the civil servants will demand for salary increase because standard of living has increased. So definitely, there will be demand for salary increments once fuel subsidy is removed since there will be increase in petroleum products prices, prices of goods will increase and there will be industrial actions that will lead to suspension of economic activities in this country for weeks or months,” Gbagir stated.
On the flip side, some Nigerians believe the removal of subsidies is long overdue. This school of thought claims that Nigeria is at least 10 years late to the party. They see subsidies as unsustainable, inefficient and responsible for the lack of competition in the oil sector.
Nigeria had the third-lowest petrol pump price in Africa, after Angola and Algeria. This position strengthens the argument for keeping oil subsidies. If other oil-producing states are doing it, Nigeria can keep subsidies too.
A large chunk of both schools of thought does not entirely believe in the idea of giving N5, 000 transport grants to the poorest Nigerians. Some say the grant will be more expensive than the existing fuel subsidy and would have an even worse impact on state finances. N5, 000 for 40 million Nigerians monthly, would amount to N2.4 trillion, which is more than the existing subsidy payments of about N1.8 trillion per year. Mathematically, this is correct. For 30 million Nigerians, the cost of maintaining this grant per year will be N1.8 trillion, which is also as bad as the subsidy payment itself. Going by what the minister said, the cost of the grants is worse. This drives the argument for keeping subsidies.