Considering the consequences of the removal of fuel subsidy ahead of the 2023 general election, the Federal Government quickly retreated and suspended it. The suspension came three days to the planned nationwide protest by the Nigeria Labour Congress (NLC) on January 27. However, the withdrawal of the removal of the fuel subsidy scheduled for June this year is seen as a temporary reprieve. The issue of fuel subsidy removal will continue to elicit conversations between the government and the masses until a lasting solution is arrived at.
Alternatively, the government has also proposed an 18-month extension of the implementation of the Petroleum Industry Act (PIA). The immediate implication is that the burden of the subsidy removal has been shifted to the next administration from May 29, 2023 if the National Assembly approves the extension of the PIA implementation. Government’s policy somersault was announced by the Minister of Finance, Budget and National Planning, Zainab Ahmed, and the Minister of State for Petroleum Resources, Timipre Sylva.
The government also ruled out the possibility of gradual increment of fuel price, saying that nothing of such in whatever guise was contemplated. Rather, he explained that the suspension of the removal of subsidy was to give all stakeholders time to ensure that the implementation of the policy was seamless and that necessary modalities were put in place to cushion the effects of the removal of the subsidy.
The decision to shelve the plan has come with another jigsaw puzzle as the Nigeria National Petroleum Corporation (NNPC) has submitted a hefty N3trillion budget to the government to finance fuel subsidy this year. The Group Managing Director of the corporation, Mele Kyari, had claimed that fuel consumption in the country stands at 65.7 million litres daily, a claim that has been disputed by the House of Representatives. There is no doubt that the plan to withdraw fuel subsidy, which will lead to immediate increase in the price of petrol, remains very contentious. It predates the present administration. However, under the present government, the price of fuel has been increased by 100 per cent since it came to power in 2015.
At various times as a presidential candidate, President Muhammadu Buhari strongly opposed subsidy removal, and had urged organised labour to resist the withdrawal with everything at its disposal. The subsidy removal conundrum has persisted because of the failure of successive governments in the country to squarely address the problems of the petroleum sector. Central to this is the failure of the government to manage Nigeria’s four oil refineries and the inability to build new ones. It is disheartening that the country is the only member of the Organisation of Petroleum Exporting Country (OPEC) that still refines its crude oil outside the country. It is good that the government has listened to concerned Nigerians and suspended the removal of fuel subsidy. Apart from wrong timing, the fuel subsidy removal would have impoverished Nigerians the more. It will further escalate the economic hardship in the country amid high inflation, tariffs on different needs, unemployment, weak purchasing power, poverty and high cost of food items. Therefore, the subsidy issue has become a matter that government should handle with utmost caution, especially when it has been shrouded in secrecy.
Government should always consider the interests of the people before taking any decision on crucial matters that affect the people. Certainly, subsidy on consumption items like petrol is one of such issues that require introspection. With the withdrawal of subsidy now deferred, government should begin to fix the moribund refineries and power sector before contemplating any subsidy removal in future.
Let government boost the production capacity of our refineries. For years, so much has been spent on Turn Around Maintenance (TAM) of these refineries and yet with limited results due to corruption. We welcome the inauguration of the 650,000 barrels per day refinery owned by Dangote Group, which could boost domestic production. Government should, however, not rely on this to boost the country’s refining capacity. Let government rehabilitate its four refineries and build new ones as well. Interestingly, the four national refineries have a combined refining capacity of 450,000bpd.
Last year, government signed a multi-billion dollar contract with a foreign firm to rehabilitate some of the refineries. The first phase will be completed next year. We urge the government to constantly dialogue with organised labour and other stakeholders to find lasting solution to the issue of subsidy removal. Priority attention should be given to revamping our refineries and the power sector. If Nigeria can refine fuel and other petroleum products enough for domestic consumption there will be no need for importation of such products. And without the importation of fuel, the issue of subsidy would not arise at all. Therefore, let government do more to ensure that we have the capacity to refine fuel and other petroleum products.