While many Nigerians celebrated the removal of the fuel subsidy by the new president of Nigeria on 29th May 2023 believing it was a good move by the president, the reality of the fuel subsidy removal has begun to manifest leading to sad comments from Nigerian citizens. The fuel subsidy initiation was intended to cushion the effect of rising global oil prices in the 1970s during the military regime of President Olusegun Obasanjo. Today, fuel is expensive in Nigeria because of the fuel subsidy removal by President Bola Ahmed Tunibu amongst other factors.
Comparing the global oil price as of the year 1977 and 2023, there is a wide difference in the global oil prices indicating a higher oil price in 2023. Global oil prices are volatile due to various events including geopolitical events, supply-demand dynamics, and other market speculations. Due to the current global increase in prices of oil and the latest population rate increase in Nigeria, it is evident that the need for fuel subsidy in 2023 surpasses the historical need for fuel subsidy as of 1977.
According to The Guardian, The National Petroleum Company (NNPC) Limited in May, reviewed the fuel pump price from N184 to N537 per liter as evidence for the fuel subsidy removal. As of November 2023, the NNPC fuel price has further increased to above N600 per liter.
Subsidy removal by the new government in Nigeria has resulted in a lot of sad season for many Nigerian populations due to its effects manifesting in increased inflationary pressure in the economy affecting general price levels including high transport fares, increase in food prices, high rent, school fee reviews, increase medical bill amongst others.
Aside from the subsidy removal, the increased fuel price is caused by other factors such as Limited refining capacity within the country which means that a significant portion of the fuel consumed in Nigeria is imported, exchange rate fluctuations, infrastructure deficiency, fuel distribution challenges including bad roads, regulatory fees such as government taxes and levies which can significantly impact fuel prices.
As an oil-producing country, Nigeria has been exporting its crude oil and Liquified Petroleum Gas (LPG) for several years with export data averaging 1,812,900 Barrel/Day from Dec 1980 to 2022, with 43 observations. The data reached an all-time high of 2,464,120 Barrel/Day in 2010 and a record low of 935,200 Barrel/Day in 1983 with an estimated average annual price of $79.75/barrels in 2023.
According to BudgIT, the average daily fuel consumption has dropped from 69.54 million liters per day to 45.74 million liters per day in 3 months ranging from May to July. This indicates a 31.8% margin and a difference of 23.8 million liters.
The implementation of the fuel subsidy removal policy was unorganized and lacked a proper implementation strategy. Today, the Nigerian population is suffering the consequences of this poor policy implementation strategy as evidenced by the inflationary pressure across all sections that directly affect the masses. The cost of living is extremely high with little if no expectation of improvement
The big question.
Now that the subsidy is gone, where will the Funds be redirected to? We’ve seen the government talk about palliative as one of their core plans. This plan has created and is creating false hopes in many citizens as time keeps rolling without anything being done yet. Is this another fund mismanagement plan or is it truly an intervention to the current problems in the country?
Nigerians are worried as there is no light at the end of the tunnel anymore. Nothing has been done to improve the key economic drivers like improving production aiming at being a major export-driven economy, decreasing the unemployment rates, and lowering the interest rate amongst other indicators.
The implementation of the fuel subsidy removal policy has shown a clear need for carrying the masses along when establishing any policy that affects them and adhering to proper public policy processes including Identifying and defining the issue that requires attention and potential policy action, policy formulation including research and gathering data, policy legitimation, policy implementation, policy execution, policy evaluation and adjustments.
Nigerians need policies that will work for their good or better still, they need to be involved in the decision-making process that affects them. The fuel subsidy removal policy follows almost the same approach with the naira redesign policy.