Fuel subsidy payment has been on for many years, and the amount keeps on increasing every month and every year without the actual benefits accruing to the targeted population. After several probing and public hearings in the National Assembly, the business of subsidies keeps on flourishing. The deliberate business of subsidy emerged as a result of the inability of the Federal Government to make the four refineries functional to refine the crude oil locally and stop fuel importation. The refineries could not work because of the business of turnaround maintenance every year that has failed to turn anything around, which is also lucrative; while the personnel and overhead costs are paid every month for processing zero crude, and naught output. It’s interesting to know that if the yearly turnaround maintenance worked, and the cabals agreed to refine crude oil locally, there wouldn’t be a lucrative business called subsidy. So, there is a symbiotic relationship between the subsidy payment, turnaround maintenance, the political will to refine crude oil locally, and the transactions in the petroleum sector in Nigeria.
According to media reports, in 2014, Under President Goodluck Jonathan, the yearly subsidy payment was N482bn which everyone shouted that it was too much. Under former President Muhammadu Buhari, it increased to N722.30bn in 2018 and later metamorphosed to N4tn in 2022. But the International Monetary Fund projected it to be N6tn going by N500bn monthly payment as of May 2022, while it was reported in October 2022 that Nigeria may overshoot N4tn in 2022.
Economically, subsidy removal is good news, and it is overdue, but it is happening at the wrong time. Better still, there are things to be done to reduce the negative impacts on the citizens and they will be discussed.
No doubt, fuel subsidy removal will bring about liberation in the oil sector and stimulate economic activities. The removal of restrictions will equally bring new investors and businesses into the oil industry, which will increase competition and efficiency. It will spur the practitioners to go into research and innovation to increase market growth as the competition increases. Over time, the increase in competition will lower the price of petroleum products, and give consumers multiple choices. It will break the barriers, and the activities of the cartels, and cabals, and improve the quality of the products and services they render to the public.
The bad thing about this good news is the fact that the necessary mechanisms were not put in place before making such a pronouncement. Fuel queues surfaced at the filling stations immediately after the pronouncement by President Bola Tinubu, during his inauguration speech, when he said, “Subsidy is gone.” All filling station owners have started hoarding the available products, thereby causing artificial scarcity, which is bringing about the demand pull and cost push inflation for petroleum products, and other goods and services. The increase in fuel price will cause the cost of transportation to go high, which equally has a multiplier effect on the wellbeing of the people by increasing the prices of goods and services, especially food inflation. Many businesses are going to close down, and many people will lose their jobs. If urgent measures are not put in place, Nigerians should expect more crimes from those who will do anything to eat.
It is not a good time considering the occupation of the majority of Nigerians, because this is the planting season, and farm produce has yet to come out to reduce the high cost of food items, and the few available will trigger high prices. Farmers can hardly go to farms in many states now because of the activities of herdsmen, who use their cattle to destroy the farmlands, and crops and endanger the lives of the farmers. Farmers have to pay levies to the bandits in some places before they could access their farmlands. Insecurity has spread everywhere and halts every economic activity including farming. One would have expected the new administration of Tinubu to see this as a major priority. Removing fuel subsidy now without adequate measures will cause more harm than good, by increasing the suffering and pains of the poor masses.
Going forward, one would expect President Tinubu to put the necessary mechanism in place before making this hard decision. However, I suggest the Tinubu administration look into the following mechanisms to ameliorate the pains and suffering of the masses if indeed, he means well for Nigerians.
Appoint credible people in critical positions before taking critical decisions to be able to manage the outcomes, and to withstand the public reactions. There is an urgent need to put the right people in the right positions to manage the process. It is highly important to develop the change management process and the public outcry that will follow the subsidy removal to avoid chaos.
Public transportation should be looked into, to ease the movement of commuters. As we all know, private transporters are out to take advantage of a situation like this to make life miserable for the citizens. The previous attempt indeed failed to yield the desired results, as many of those public vehicles disappeared from the road, and some entered private hands for private purposes. I suggest a total overhauling of the management of those public transport companies, including Abuja Urban Mass Transport Company because they have failed to provide the needed services, while some of the vehicles are dormant.
Taking a critical look at the border closure and the associated issues before subsidy removal will help at this point. Border closure by former President Muhammadu Buhari without adequate preparation led to the food insecurity we are expressing today. Coupled with the activities of the herdsmen and bandits that made it difficult for our people to go to the farm and carry out their farming activities. Since the activities of the herdsmen and insecurity cannot be stopped to allow full farming activities in Nigeria, it would be better for the government to consider opening the border for food importation for the main time. It will help to reduce the cost of foodstuffs and ease the suffering of the people in terms of affordable food prices and reduce the high level of poverty ravaging the land.
Issues of herdsmen and insecurity must be tackled before creating additional unrest. Government should devise a means to tackle the issue of insecurity to allow the farmers to return to their farmlands to produce food for the population. It is improper for the government to ask the citizens to return to the farm and fail to secure the environment, only for the farmers to be slaughtered on their farms.
Privatise the refineries to ensure domestic production of fuel before the removal of fuel subsidy. Government should summon the courage and political will to privatise the four refineries because that is the only way to make it functional to refine the petroleum products locally. Many years of turnaround maintenance could not turn anything around for good, and there is no need to continue doing so. This should be done openly and competitively to get the right bidders that will make the refineries functional to complement the Dangote refinery in Lagos. And this will help to curtail the looming monopolistic tendency in future.
Government should grant licences to more investors for modular refineries, and more importers before the removal of subsidy. Granting licences to more local or international investors for importation and local refineries will truly liberalise the sector, help to limit monopolistic tendencies, and allow the invisible hands to rule the oil market.
Putting the above mechanisms in place and setting the guidelines for their operation will ensure the magic of subsidy removal with minimal pain and suffering.
