Fuel subsidy and fuel burden


Sheriffdeen Tella

Ordinarily subsidy is a good word. One can imagine some of the synonyms of the word such as assistance, bonus, endowment and financial aid. Any time businesses get information that the government will provide subsidy, the eagerness to receive it can be unquantifiable particularly during a recession. That same word has been turned to something else in Nigeria. The word here connotes the antonyms or opposite such as impediment, encumbrance, obstacle, handicap and hold back instead of hold forth. That is the work of corruption which affects virtually every good deed.

The announcement by President Bola Tinubu at the inauguration of his administration that fuel subsidy has stopped did catch everyone unawares. The import of that pronouncement did not mean ‘immediately’ to the uninitiated but Nigerians are quick witted. Even those born after the military’s ‘with immediate alacrity’ know what it means for a President to utter such a statement. Under democracy, when laws are made, some period of time would be given before implementation to allow citizens to understand the essence of the law. Gradually, we will get there. But it is also good the way we implement laws with ‘immediate effect’ for now. If you delay a second, Nigerians could render the law worthless.

What happened immediately after the pronouncement was interesting. Vehicle owners quickly picked their cars, buses and even jerry cans to the next fuel station to purchase fuel for keeps, taking advantage of the low price before pump prices were expectedly changed. The fuel station owners, particularly the private ones outside Nigerian National Petroleum Corporation Limited marketing or independent but bureaucratically organised stations such as Total, OANDO, AP and Conoil quickly adjusted their pump prices either in response to the pronouncement or to the actions of the consumers while others locked up their stations, afraid of backlash from the regulator if they adjusted prices without instructions. Then an argument ensued.

The consumer started accusing the sellers of adjusting prices when they bought the fuel in their tanks at the old price but the sellers who dared to sell were adamant. Everyone was guilty or everyone was right. The consumers were trying to make some gains by buying at low price and gain advantage of time lag while the sellers knew if they sold at the old price and prices rose by some high margin, they may not have sufficient money to buy appreciable quantity. That is thinking of replacement cost. It is acceptable language in business. In the language of our Niger Delta people “Nigerians no dey carry last”.

On a serious note, why should the President stop the subsidy now? Is it inappropriate now? Is it too sudden? After all, the 2023 budget made provision till the end of June not month of May? The Nigeria Labour Congress is already threatening strike. The Trade Union Congress is still consulting. But Nigerians are already coming to the realisation that it must happen and it has happened. The question is, how do we adjust now? For Nigerian workers who receive, when paid, N30,000 per month (some still get N18,000 per month), they may have to trek more to work and back home. They are likely to have less time for procreation and their children will have to stop school even if there is free education because they will need money for school uniforms and transportation. They are the concern of the NLC. I share their grief.

There is no time that policies with initial negative consequences will be appropriate! In the current and recent time, subsidy or bonus removal has been the talk of the town virtually every day and every minute in the last few days before the exit of former President Muhammadu Buhari’s administration. The discussion even snowballed into borrowing $800m for palliative. So, the issue of suddenness is surprising. A President came in, and at the pre-assumption briefing, asked for the balance sheet as an accountant, found not just zero balance but huge negative figures. The best he would do was to stop adding more negative to the existing negative figures and if halting borrowing to provide subsidy for the scammers of the subsidy arrangement is the quickest way, it is better done. The scammers’ loss is the nation’s gain in this case. At least, they have lost one month. I cannot but support this action.

Every leading party in this country knows there exists a petroleum subsidy scam. During their campaigns, even in 2015, it was proposed that the scam would stop. They stopped it then but reopened it later. Hopefully, this will be a permanent killer punch. How many ships berth in a day or week to supply us the concocted 50 million litres of fuel per day? How do the ships maneuver their ways through the congested port to deliver their contents daily or weekly? There is the need for a forensic audit of the accounts of NNPCL and allied companies or organisations involved in fuel ‘importation’. Should we be importing fuel?

The new fuel price fixed by the NNPCL is an aberration. I insist that the last three months when fuel prices varied from one petrol station to another or among fuel stations ownership was indicative of price deregulation and absence of subsidy. The NNPCL is a player in the market like any other fuel supplier and has no right to dictate prices for others. Even if it is a regulator, it cannot dictate prices under a deregulated market situation. I suspect that the company quickly advertised new prices in pretence that Nigeria owes it some money on subsidy. The problem is that the company has, by that action, falsely pushed up the consumer price. When last did a ship land to discharge fuel, for which company and at what cost? A forensic audit will expose the myth.

There is no doubt that this humongous price increase has started negatively affecting the well-being of the common people. Transportation prices have more than doubled. Nigerian workers are generally not well paid and that affects productivity in both private and public sectors. By all standards, Nigerian civil and public servants are the least paid in the world while our legislators are, as was being speculated and recently confirmed, the highest paid globally, particularly when we add the constituency allowances or constituency subsidy.

Apart from poorly skewed salaries which need to be corrected, the poor pay of Nigerian workers will not just pauperise the workers more but further entrench corruption and moonlighting in workplaces with resultant low productivity. The promise by the President for review of workers’ remuneration should be carried out with the same speed as the stoppage of fuel subsidy. That review should include harmonisation of the salaries and allowances of political office holders with the rest of society.

Lest we forget. The change in price of fuel should have less effect on the cost of production of the medium and large-scale industries because they rely more on diesel than petrol except for few official vehicles. The imperfection or imperfect information in the Nigerian market often puts the consumer at the mercy of producers. Here, the consumer is not king. He or she needs protection from the consumer protection agency. The companies may not increase prices but reduce the quality and quantity of products in the name of increase in price of fuel.

Hopefully, this policy will not summersault like it happened before now. The fuel subsidy was turned to fuel burden but the economy is now free from that burden. The President has by this singular act started attacking the nest of corruption in Nigeria. There are many areas but the next area should be the foreign exchange market where round-tripping is the order of the day. It is a complex market and the participants have entrenched themselves in the different facets of the market. There should be a weak link in the set up that can be attacked to bring the empire down. It is not within my area of specialisation and I cannot therefore offer recommendation


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