Pundits and economists alike are waiting to see on which side the argument to remove subsidy will prevail 10 years after protests against petrol subsidy removal empowered the present ruling party, which then was leading the opposition against the Jonathan administration.
Despite fears of repercussions, some economists and stakeholders agree that removal of the subsidy is a necessary step towards long-needed reform since the country has failed to make refineries work.
Already, state governors are feeling the heat in the monthly allocations from the Federation Accounts Allocation Committee (FAAC), while continued borrowings to service the government’s expenditure mount pressure on earnings.
On the other hand, the fear of inflation, often considered as the enemy of the common man, and waning trust in the government’s spending plans equally make it difficult for the government to win public appeal for subsidy removal.
Already, the feasibility of the plans to give transportation grants to poor Nigerians has raised doubts on the source of funds and impact on the volume of money in circulation, as well as transparency and accountability issues.
On January 1, 2012, President Goodluck Jonathan announced the removal of fuel subsidy, therefore, adjusting the pump price of petrol from N65 per litre to N141 in a move that sparked mass protests, known as ‘Occupy Nigeria’ across major cities of the country.
The price was later adjusted to N97 after more than a week of protests. It was further reduced to N87 in 2015.
While Jonathan faced serious backlash from the adjustment in fuel price, President Muhammadu Buhari-led administration adjusted the pump price from N87 to N145 without any protest, just as subsequent adjustments were equally accepted until fiscal policies and pandemic-induced inflation pushed Nigerians to the edge.
Like 2012, the arguments remain the same 10 years after, with the government stating that the removal of the heavy subsidy will free up funds for other public services, including health and infrastructure projects, and that the liberalisation of the fuel industry will benefit the economy.
In what seems like a make or mar decision, President Buhari’s administration appears decided on removing the subsidy this year and damn the consequences to free up resources needed to run the economy.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, on Wednesday, said the Federal Government is determined to remove subsidy on Premium Motor Spirit (PMS).
She also said a panel chaired by Vice President Yemi Osinbajo would meet with the Nigeria Labour Congress (NLC) and other stakeholders to consider the proposed N5,000 transport palliative and other options aimed at ameliorating the effects of the planned subsidy removal on Nigerians.
Responding to questions by journalists at the public presentation of the 2022 budget, Ahmed said the Federal Government was set to comply with the provisions of the Petroleum Industry Act (PIA) 2021, to fully deregulate prices of petroleum products.
She said: “There is a group that is meeting, chaired by the Vice President, Yemi Osinbajo. On the transport palliative, there are several options we are working on. As people resume from their holidays, this committee’s work will resume and part of the work will be to engage with the NLC and get inputs from labour.”
One of such options is the plan by the government to empower transport workers, alongside the proposal to pay N5,000 to poor Nigerians as a transport subsidy.
The options remain hard as labour unions are already up in arms to embark on a protest if the decision on subsidy removal is taken.
In a message issued by the NLC President, Ayuba Wabba, to mark the New Year, the union said that it suspected foul play and sabotage in the inability and unwillingness of successive governments in the country to resolve the crisis of under-development of Nigeria’s downstream petroleum sector.
The union regretted that as a major oil-producing country in the world and after nearly 70 years of oil exploration in Nigeria, the country cannot deliver on efficient and effective public petroleum refineries.
Reacting to the government plan to increase the price of petrol, NLC said it would go ahead with the nationwide protest scheduled for January 27, adding that the protest in the states will culminate in the submission of protest letters to the 36 state governors, and subsequently, a national protest on February 1, to be held in the Federal Capital Territory (FCT).
BEYOND subsidy removal, Nigerian has been unable to take advantage of higher crude prices last year, partly due to OPEC cuts and prevailing production challenges driven by crude theft and third-party interference on infrastructure.
At a projected, 1.86 million barrels daily oil production in the country’s 2021 budget, Nigeria recorded a deficit of almost 200 million barrels in the first 11 months of 2021.
Figures from the Nigerian Upstream Regulatory Petroleum Commission (NURPC) showed that while Nigeria was expected to pump approximately 635 million barrels of oil by November this year, it struggled to produce only 441 million barrels in the period.
The country’s average crude production has been around 1.27mbpd, just as production challenges continued to impact NNPC’s remittances to the federation account and by extension the monies shared by the federal, state and local governments this year.
If oil trade at $100 a barrel, as projected, Nigerians will have to prepare for higher pump prices of at least N300 a litre, without subsidy from the Nigeria National Petroleum Corporation (NNPC).
The Centre for the Promotion of Private Enterprise (CPPE) has expressed reservations about the government’s political will to remove fuel subsidies.
According to CPPE, the timing ahead of the 2023 general elections, raises concerns for political actors to implement certain anti-populist policies.
The CPPE Chief Executive Officer, Dr Muda Yusuf, noted that the burden of petroleum subsidy on government finances may persist in 2022 despite the PIA.
Muda said: “On account of political exigencies and push back by the ruling party and labour, the economy may have to bear the heavy fiscal burden of subsidy in 2022.
“This also signals delay in the full implementation of the PIA and reform of the downstream oil sector. However, if the Dangote refinery comes on stream this year, the fiscal pressure may abate, but not completely eliminated.”
On his part, the Founder and President, Moahz Group of Companies, Dr. Ojo Abdulqadir, said the proposed fuel subsidy removal would significantly increase Nigeria’s hardship index.
As a result, he said the planned subsidy removal should be strategically implemented in a manner that would not plunge more Nigerians into unprecedented levels of economic hardship.
FORMER Chairman of the Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, noted that the Nigerian state lacks the capacity to wisely and effectively invest in social security for its citizens, stressing that it was too bad that the All Progressives Congress (APC) deceptively worked against the removal of subsidy by Jonathan at a time the economy could have sustained its impacts.
According to him, while the “textbook economics” of subsidy removal makes sense, the political economy of it needs more consideration.
“The COVID-19 and near collapse of the Nigerian economy means that removal of subsidy, although desirable, may not be advisable considering the frailties of the economy. An expansive cost-benefit analysis does not support removing all subsidies at once,” he said.
Director of Centre for Democracy and Development (CDD), Idayat Hassan, said 10 years after Occupy Nigeria, a lot has changed in the country.
She said though there were worries during the subsidy removal of 2012, the pump price of the products has repeatedly gone up under the present government without corresponding benefits for the masses.
“It is now almost impossible to gather the kind of mass revolt that greeted the subsidy removal in 2012. There is now fragmentation along religious and ethnic lines. There is a lack of national cohesion and labour movement has become a shadow of itself,” Hassan said.
She equally doubted the use of the benefits should the subsidy be removed, saying it remained unclear if the removal would benefit the masses or provide more money for a few elite to enjoy.
An energy professor at the University of Lagos, Yemi Oke, insisted that it is now clear that the agitations against subsidy in 2012 were only a political arrangement.
He said that such political gimmick would not help any country, adding that petroleum products remained a global commodity that reflects economic realities that may be beyond local politics.
“It was clearly a political game and it’s backfired. The fact that we don’t have people on the streets, campaigning and demonstrating against the current administration shows it was all needlessly politics,” he noted.
Oke said given the realities in exchange rates and other economic indexes, improving on local refining of crude oil and subsidising production instead of consumption remain the most sustainable option.
Energy expert and former Managing Director at Nigerian Bulk Electricity Trading Company, Rumundaka Wonodi, said the government can only convince citizens on dropping subsidies if the public office holders stop wasting the nation’s resources on themselves frivolously.
A situation where government officials living in luxury, enjoying imported cars and other things according to him, will discourage the masses to drop one of the only benefits they might be getting from the government.
LEADERS of socio-political and cultural groups have decried the planned subsidy removal, saying the President wants to destroy the masses using the potent weapon of economic hardship before the expiration of his tenure in 2023.
In his remark, the leader of Yoruba socio-political group, Afenifere, Chief Ayo Adebanjo, said he was surprised that Nigerians are still expecting anything good from the APC-led government despite the lies and propaganda the government had deployed since 2015.
Former president of Igbo thinks tank group, Aka Ikenga, Chief Goody Uwazurike, said this is not the right time for any reasonable administration to remove subsidy from oil.
According to him, “this government vilified the administration of former President Goodluck Jonathan in 2012 that oil subsidy was a scam. Let Buhari and his cabal now tell us why they are planning to remove the same subsidy. It is all propaganda aimed to destroy Nigerians.”
In his remark, Secretary-General of Yoruba Council of Elders (YCE), Dr. Kunle Olajide, said for the fact that APC mentioned it wanted to remove subsidy from oil while the election is just a year ahead, the ruling party has lost it.
“The process of removal of subsidy from oil should be a gradual thing. I don’t imagine any reasonable administration thinking of this type of thing when we are still suffering the effect of the economic hardship inflicted on us COVID-19 pandemic and other challenges. These people in government don’t mean well for us.”
Also accusing the Federal Government of insensitivity, Urhobo Progress Union (UPU) said the proposal is an attempt at murdering Nigerians.
Spokesman of the union, Abel Oshievire, condemned the planned removal and warned the government against the adverse effects it would have on the Nigerian masses.
The Arewa Consultative Forum (ACF) called on the Federal Government to consider the plight of suffering millions of Nigerians and shelve the plan to increase the price of fuel.
Its spokesman, Emmanuel Yawe, said the Federal Government has not taken the present reality in the economy into consideration before planning to increase the price of fuel.
But sharing a contrary opinion, the Director-General of the Development Agenda for Western Nigeria (DAWN) Commission, Mr. Seye Oyeleye, said the removal is a poison Nigerians must swallow if they really want infrastructural development.
According to him, “it is a decision if this government fails to take another government coming on board would have to consider taking it. I however doubt if this government can go ahead with the removal bearing the fact that election is coming next year.”