President Bola Ahmed Tinubu had during his inaugural speech as the 16th President of Nigeria made it clear that his government will no longer provide funds to subsidize the pump price of petrol. It, in effect, reinforced the removal of fuel subsidy as enshrined in the 2023 Appropriation Act which will end the subsidy regime on June 30, 2023.
Since this pronouncement by President Tinubu, there was consequential hike in the pump prices making many Nigerians to react negatively to the policy. They feared that petrol subsidy removal in Nigeria could cause inflation, reduce economic welfare, hurt economic growth, reduce household income and make firms less competitive. However, there are other who are optimistic that the move was in the right direction and was long overdue.
The NNPC Limited in its October 2022 report, said that the agency recorded zero revenue from oil export due to subsidy payments. Nigeria allocated N36 trillion naira in the 2023 budget to pay for petrol subsidies for the first half of this year. As a matter of fact, the federal government spends about N40.1 billion naira daily to subsidize every litre of petrol consumed in Nigeria by at least N600. This means that government spends about N1.24 trillion on petrol subsidy monthly. Currently, Nigeria is in massive debt to the tune of N41.60 trillion naira. This is quite unacceptable.
It is unfortunate that there are cabals in the corridors of power who would not want the nation’s four refineries to work. These dark forces who benefit from the petrol subsidy are cogs that block the commitment of the government to revamping the nations deteriorated refineries.
The bigger picture, however, is that the removal of petrol subsidy will have far reaching benefits to the nation’s economy. One of the primary advantages of removing the petrol subsidy is that it would free up resources for other sectors of the economy. For instance, the significant portion of federal government’s budget spent on subsidies can now be ploughed back into other critical sectors of the nation’s economy such as education, healthcare and infrastructural development.
To enable a conducive environment for investors, the deregulation of the oil sector is critical. It will ensure private sector participation in the importation of petroleum products which will free up the market, empower many Nigerians and allow the government to focus on other key sectors of the economy.
Besides, the measure will ensure the ready availability of petrol at all times for all Nigerians as Nigeria will be saturated with petrol and there will be no diversion by marketers. That way, the Federal Government will no longer remain the leading supplier of petroleum products as this approach will allow investors to take over the role of supplying petroleum products.
No doubt, this measure will ensure competition in the industry and market forces will drive down the price of petrol in the long run as witnessed in the telecoms sector for the benefits of Nigerians.
The removal of petrol subsidy will curb the greed for higher profits and sabotage by a few players in the oil industry, which will positively affect the economy. There is high hope that the removal of petrol subsidy will benefit the citizens more than when it was being subsidized. It is believed that if government can revamp one or two of its ailing refineries, the price of petrol will come down.
On the other hand, government should attract investors into the petroleum sector to boost the country’s economy. Since the year 2000, government has issued at least twenty refinery licences to private companies but it must provide conducive environment and enough playing grounds for them to thrive. So far, only Dangote group has built a refinery in the country.
Finally, government should, as a matter of urgency, reduce the percentage of excise taxes which the citizens pay, to enable them afford the new petrol price.
After all said and done, the removal of the petrol subsidy by President Tinubu is a painful surgery that will at last ensure economic emancipation of the Nigerian nation.
Written by   ABUCHI NWOZOR
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