Fuel prices across the country have increased following the announcement of fuel subsidy removal by the recently inaugurated President, Bola Tinubu. In his inaugural address, the president declared that there would no longer be a petroleum subsidy regime as the current 2023 budget does not contain it, adding that funds for subsidies will be diverted to other things like public infrastructure, education, health care, and jobs. This decision to remove fuel subsidy was one of his promises during his campaign.
“On fuel subsidy, unfortunately, the budget before I assumed office is that no provision is there for fuel subsidy. So, the fuel subsidy is gone,” the president said.
His announcement has resulted in a hike in fuel prices across different filling stations in Nigeria and has generated tension among citizens. Our reporters who observed the current situation noticed the return of queues in several filing stations in Ogun state and also a change in prices.
A day after Tinubu’s inauguration and the removal of fuel subsidy, OGUN WATCH observed that KAAD filling station situated at Ago Egun, Ijesa, Abeokuta, sold fuel for #500/ltr. Also, Total filling station at Abusi, Ijebu-Igbo, sold for the same price. Hayden Oil, Total filling station at Iperu also sold at #500/ltr.
Price increase was also reported in several filling stations across the country.
Citizens Lament Subsidy Removal
Citizens who spoke to OGUNWATCH berated the government for the removal of subsidy and the unavailability of the product.
Teslim Idowu noted that the hardship influenced by the removal of subsidy is a bad way to start an administration adding that it would affect citizens more if the PMS records an increase in price and becomes unavailable for purchase
“Judging by the look of things we can’t say this is going to be good for us, but if the subsidy is going to be removed, I think it is better to be. Consequently, we should know exactly what is going on, on fuel. The price is not the problem but making the fuel available is, cause it wouldn’t be nice for the price to be up yet it should be difficult to get.
“This is a very bad beginning, on Sunday the fuel price was 220, the fuel price just went up overnight, and everybody now have to queue to get fuel, this is not sitting well with me.” he said.
“Fuel subsidy removal has continued to be one of the most senseless policies of the ruling class” Femi Adeyeye remarked.
He accused the government of failing in their constitutional duties and then found a way to push the suffering on the people “under the guise that there is no money to fund welfare”.
“Why can’t Tinubu, just like he announced subsidy removal on the first day like a hero of the ruling class, announce that salaries and allowances of politicians are gone- the exact way he shouted Fuel subsidy is gone” he questioned further.
Experts Hail Subsidy Removal Despite Obvious Challenges
Segun Olakoyenikan, a financial analyst, posited that Nigeria has been held back a lot because of fuel subsidy and with the removal, Nigeria can save as much as 4 trillion naira a year, which can be diverted into other areas of urgent needs.
“some of the arguments against subsidy payment is that we are not actually subsidising for people who deserve it and a lot of loopholes in the system, so by removing the subsidy, Nigeria can save as much as 4 trillion naira in a year, which of course can be diverted into other areas of urgent needs such as our education, health sector and other key sectors.
“That policy, if well pursued, can actually wrap up investment in those areas in the next four years. Just imagine if we begin to invest 4 trillion naira into health, education and other critical sectors, you can imagine what would happen within that space of time.” Olakoyenikan said.
He added that although the policy is a good one, it would have some economic consequences but “We hope to see increased investment if the policy is well followed through”
Also speaking to OGUNWATCH, an economy expert, Muda Yusuf, said that the subsidy removal would reduce fiscal deficit, stimulate investment, and ultimately ease the burden of mounting debt.
Yusuf noted that currently, It is extremely difficult to attract private investment into our petroleum downstream sector because of the unsustainable subsidy regime and the stifling regulatory environment. The subsidy removal will eliminate the distortions and stimulate investment.
“We would see more private investments in petroleum refineries, petrochemicals and fertiliser plants. Post subsidy regime would also unlock investments in pipelines, storage facilities, transportation and retail outlets. We would see the export of refined petroleum products, petrochemicals and fertiliser as private capital comes into the space. Quality jobs will be created.
“There is a foreign exchange effect. This would result from the import substitution as petroleum products importation progressively decline. This would conserve foreign exchange and boost our external reserves.” he said.
He posited that an Increase in investment would provide employment in the petroleum downstream sector and the Smuggling of petroleum products across borders will come to an end with a market pricing of refined products. He added that for this to be actualised, there needs to be an end to NNPC monopoly in the supply of petroleum.
“Competition is imperative for subsidy removal to be sustainable. Private sector players must have access to foreign exchange to import, pending the commencement of domestic refining operations,” he said.
Speaking further, he called for Palliatives for citizens to cushion the effect of the subsidy removal.
“There must be Palliatives that should be segmented into immediate, short term and medium-term deliverables. Immediate and short-term options include wage review in public service, the introduction of subsidized public transportation schemes across the country and a reduction in import duties on intermediate products for food-related production to moderate food inflation.
“In the medium to long-term, there should be accelerated efforts to upscale domestic refining capacity, driven by private investments; accelerated investments in rail transportation by the government to ease logistics of fuel distribution across the country as well as domestic freight costs,” he said.