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Fuel Subsidy Removal: The Issues

FG to End Petrol Subsidy in 2022 as World Bank Condemns N2.9tn Funding | Daily Report Nigeria

By Akpi Tamarauemomoemi Mirabel

The issue of fuel subsidy has been in place in Nigeria since the 1970s.

It began with the government routinely selling petrol to Nigerians at below cost to minimize the impact of rising global oil prices on Nigerians.

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However, the cost of subsidizing petrol has ballooned over time and riots have broken merely because of rumors of any increase in the past.

In the eight years of Muhammadu Buhari’s administration (2015-2023), subsidy payments gulped about 11.2 trillion. A breakdown of data from the civil-tech group, budget, shows that N316 billion was paid for subsidy in 2015.

The figure dropped to N99 billion and N141.6 billion in 2016 and 2017 respectively. By 2018, a staggering N722 billion was paid for petrol subsidy.

Then in 2019, the government spent N578 billion and N134 billion in 2020. The following year ,2021, the federal government appropriated N1.42 trillion for a petrol subsidy and N4.3 trillion in 2022.

In the 2023 budget, the Nigerian government budgeted N3.6 trillion for petrol subsidy for six months ending in June. That’s roughly N560 billion every month.

These amounts are more than what the government spend on education, health and infrastructure during the period under review.

In the build-up to the 2023 elections, fuel subsidy removal became one of the major in the campaigns. The three presidential candidates promised to remove the subsidy. Mr. Tinibu of All Progressives Congress won the presidential election in February with 37 percent of the votes.

His main rivals; Atiku Abubakar of PDP who polled 29 percent and Peter Obi of Labour Party who polled 29 percent, are challenging Mr Tinibu’s victory. All three men promised to remove the petrol subsidy.

In it’s global outlook for Africa and Nigeria, the world bank advised against retaining fuel subsidy in Nigeria, saying it is a source of wastage and leakage.

Most Nigerian economists also agreed that the subsidy regime was unsustainable. Fuel subsidy has long been the subject of abuse and corruption.

It also encouraged smuggling into Cameroon and Benin, where fuel can be sold for twice the price and even more as international oil prices rise.

President Tinibu’s removal of the subsidy has raised the cost of living across the board and inflicted strain on wider population.

Prices of transportation and essential goods and services shot up significantly across the country as Nigerians grappled with the ripple effects of fuel subsidy removal.

Disclaimer: The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of Daily Report Nigeria.

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