(OPINION) Fuel Subsidy; Penny Wise Pound Foolish – By Adewole Kehinde

Mrs. Zainab Ahmed said and I quote, “In 2022, because of the increased crude oil price per barrel in the global market, now at $80 per barrel, and also because NNPC’s assessment is that Nigeria is that the country is consuming 65.7 million litres per day, that we would end up with an incremental cost of N3 trillion in 2022.”

 

Outrage and widespread resistance greeted the Nigerian government’s attempt to remove fuel subsidy from Premium Motor Spirit (Petrol) despite the provision for deregulations in the Petroleum Industry Act.

The Nigeria Labour Congress had threatened to shut down Nigeria on Thursday, 27^th January 2022 if the Federal Government through the Nigerian National Petroleum Company (NNPC) Limited removes the subsidy on Premium Motor Spirit (Petrol).

After hours of meeting with the President of the Senate, Dr Ahamd Lawan, the Minister of Finance and National Planning, Zainab Shamsuna Ahmed and that of Ministry of Petroleum Resources, H.E Timipre Sylva, announced that it has postponed the implementation of the Petroleum Industry Act (of which subsidy removal is an integral part of) by 18 months.

The implication of this is that the Nigerian National Petroleum Company (NNPC) limited has requested the sum of Three Trillion Naira (N3,000,000,000,000) as fuel subsidy for 2022.

Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed this to State House correspondents after the Federal Executive Council meeting which was chaired by President Muhammadu Buhari on Wednesday.

Mrs. Zainab Ahmed said and I quote, “In 2022, because of the increased crude oil price per barrel in the global market, now at $80 per barrel, and also because NNPC’s assessment is that Nigeria is that the country is consuming 65.7 million litres per day, that we would end up with an incremental cost of N3 trillion in 2022.”

According to her, by implication, the Federal Government will have to make an incremental provision of N2.557 trillion in order to meet subsidy requirements which currently average about N270 billion per month.

The Finance Minister further disclosed that only N443 billion is presently available in the 2022 budget meant to accommodate subsidies from January to June.

There is no doubt that Nigerians will have to pay a price for not removing the petrol subsidy now and this will come from borrowing to shoulder the fiscal burden.

Just like the presidential spokesperson, Femi Adesina have said, “Head or tail, Nigeria will have to pay a price; it is either we pay the price for the removal in consonance and in conjunction with the understanding of the people. The other cost is that borrowings may continue and things may be difficult fiscally for both the state and the federal government. You know how much could have been saved if the subsidy was removed and how it could have been diverted to other spheres of our lives…we have to pay a price.”

What is the way forward? One thing is sure: paying Nigerians to consume petrol is hurting government finances and the economy. The Federal Government paid over 2trillion Naira to Nigerians to help them put petrol in their vehicles in 2021. That is basically what we did.

Could the over 2trillion Naira have gone into something else more beneficial to the people; like education, health and roads? The reasonable answer is yes. But would the 2trillion Naira have really gone into education, health and roads? That is where the problem lies.

Still, I would like to make these points:

ü Transport costs will always go up whether or not petrol prices remain the same

ü Nigerians have shown over time that they are not really averse to deregulation as long as they will enjoy the benefits

ü  Government needs to initiate a decent conversation with the key stakeholders before implementing deregulation or announcing palliative measures

ü  Unions should be encouraged to propose how the fundamental problems with fuel pricing can be addressed forever so that we do not return to strikes and protests perennially.

Regrettably, the government has already bungled the whole thing, but it can still go back to the drawing board to save the country from the upheavals and the economic costs that come with strikes.

 

Adewole Kehinde