The question of the fuel subsidy


The return of fuel queues in and around Lagos has once again brought the arguments for the removal of the fuel subsidy to the fore.

While the fuel situation has worsened in Lagos, residents of the Federal Capital Territory (FCT) have been experiencing a fuel shortage for four to five months now. In Abuja, this is the new normal. The question is how long are we going to continue like this? According to reports, fuel subsidy bills could reach $6 trillion this year.

Various groups have criticized the return of queues, but Nigerians are tired of excuses. They just want fuel – plain and simple. So how can we solve this perennial fuel shortage once and for all?

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said the huge sum spent on fuel subsidy payment limits the ability of the Federal Government to deliver its service and exceeds the debt burden of 40 trillion naira. It’s not sustainable.

However, President Muhammadu Buhari, in an interview with Bloomberg, said that although his administration planned to remove the fuel subsidy last year, further consultations with stakeholders as well as events that unfolded this year have made this decision increasingly untenable.

The president also chastised the International Monetary Fund (IMF) and the World Bank for insisting on cutting subsidies in Nigeria when some western economies also administer subsidies.

Undoubtedly, Nigeria is between a rock and a hard place. No government succeeded in removing the subsidies and President Buhari’s administration tactically shifted the burden onto the next administration.

I know that removing subsidies without local refining of petroleum products is a recipe for disaster. The price of everything will triple and may lead to social unrest in the country worse than the Endsars protest. Everything in Nigeria is tied to the price of fuel. A vendor of Akara or Groundnut will increase his price and when you ask him why, he will attribute it to an increase in the price of fuel.

Apart from Lagos and Abuja, most petrol stations in most states sell fuel above N165. So what exactly are we subsidizing?

The government has always been waiting for the Dangote refineries to start bailing them out and the opening keeps getting postponed.

I am always asked how much does it cost to establish a refinery? the more than 4 trillion naira spent so far would have gone a long way toward establishing a refinery.

Moreover, the government should forget about the rehabilitation of any of our refineries, because it is just a waste of money. Refineries should be sold vintage. For over 10 years we’ve had people working in these refineries and they’re getting salaries every month and yet we haven’t even refined a single drop of oil.

There are huge benefits to refining locally. In addition to saving currency and subsidies, we will have diesel and aviation fuel readily available. Plane tickets will collapse and everything.

Again, we have a lot of young people refining oil illegally in the Niger Delta. Why not convert most of these illegal refineries into modular refineries capable of meeting the needs of the region.

In addition, the federal government should end the monopoly privilege enjoyed by the Nigerian National Petroleum Corporation, NNPC. Recall that the NNPC currently enjoys a monopoly on the import and supply of petroleum products in the country.

The truth is that the huge fuel subsidy bill is no longer sustainable. Something has to give.


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