Mixed Reactions Trail Fuel Subsidy Removal as Cost of Transportation Rises By 100%

Peter Uzoho

Confusion and mixed reactions continue to trail the removal of petrol subsidy by President Bola Ahmed Tinubu, with many Nigerian masses criticising the choice of the policy and its timing. 

The announcement, which came during Tinubu’s inaugural address on Monday, has changed the dynamics of petroleum marketing in Nigeria, largely benefitting the petroleum products dealers and traders but hurting the masses, who are trying to recover from the suffering they went through recently during the naira redesign policy. 

Tinubu had during his inaugural address as the 16th president of the country, told Nigerians that the President Muhammadu Buhari’s government did not make any provision for subsidy in the budget he inherited, saying, “subsidy is gone”. 

He had said that there was no justification for spending Nigeria’s scarce resources on subsidy that only benefit the rich, adding that his goverment will rather channel the resources to fix critical sectors that will benefit the masses.

Since the pronouncement, petrol marketers have gone into frenzy, hoarding petrol they have in stock, which they bought at a subsidied rate, and hiking the pump prices to as high as N500 and above.

The Nigerian National Petroleum Company Limited (NNPC) had on Wednesday, changed its pump prices across the states of the federation with the least price now N488 per litre and the highest N557 as against N185 sold previously.

Other filling stations owned by private marketers have followed suit, with their pump prices now between N500 and N550 per litre in Lagos and N600 and above in other states. Black marketers, who have cashed in on the situation are now making brisk business as they are selling between N800 and N1000 per litre, depending on the locations.

Although, the Petroleum Industry Act (PIA) passed in August 2021 had provided for the deregulation of the downstream petroleum sector and the removal of fuel subsidy, the Buhari government had in January 2022 postponed its implementation by 18 months.

The same goverment had made moves to remove subsidy before the expiration of its tenure but backed out at the last minute, shifting it to the current Tinubu’s government.

However, the subsidy removal, which took many Nigerians by surprise, as the new government had not made any plan for a smooth process, has worsened the cost of transportation in the country as commuters now find it difficult to afford to pay the high fares.

Transport fares have suddenly risen by about 100 per cent, with workers who are still crying to be paid their N30,000 minimum wage which was approved many years ago now have to contend with the new challenge. 

But the big questions on the lips of many Nigerians, particularly the labour unions have been, why the president took the decision without consulting the Nigerian people, and why he decided to remove subsidy in May despite the provision in the 2023 budget for subsidy to end on June 30th.

The Buhari goverment had budgeted N3.6 trillion for petrol subsidy for the first half of 2023, that is, January to June ending. So, the posers are: what happens to the budgetary provision for petrol subsidy in June 2023? Why was Tinubu in such a rush to scrap subsidy without waiting to settle down and get proper briefings from his economic team and stakeholders and also roll out plans to manage the aftermaths?

Is Tinubu goverment going ahead to draw the $800 million loan from the World Bank, which the Buhari administration had sought for and gotten approval for, to be used as subsidy removal palliative, and what are the plans for the utilisation of the fund by the current government?

However, some analysts argued that price-fixing seems to have taken the backdrop of the subsidy removal, reflecting the monopolistic state of the market.

While NNPC has been the sole importer and administrator of the government subsidy, most marketers, especially the Independent Petroleum Marketers Association of Nigeria (IPMAN) as of press time had no knowledge of the exact ex-depot price of the product.

At a meeting held on Wednesday, which ended in a deadlock, the Nigerian Labour Congress (NLC)’s President, Joe Ajaero, accused NNPC of ignoring ongoing meetings on the issues, adding that  the release of the template might not allow the congress to continue consultations with stakeholders if nothing was done to withdraw it.

The Trade Union Congress (TUC) had earlier described the subsidy removal as a joke taken too far, calling for its reversal.

But the petroleum marketers, who expectedly threw their weight behind Tinubu on the subsidy scrapping, advised Nigerians to adjust themselves to the new reality for the good of the country.

Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN), Mr. Clement Isong, in a telephone chat with THISDAY, explained that with the new petrol marketing regime, MOMAN members would be selling their products based on their cost of purchase.

He urged Nigerians to embrace the new petrol marketing regime and reduce their fuel consumption, saying the government should put in place appropriate palliatives to cushion the effect on the most vulnerable citizens.

“So, everybody will be selling his product depending on how he bought. I think we all know that this is necessary for the progress of our country, but there should be some palliatives for the most vulnerable of the society. But for a large number of Nigerians, we need to tighten our belts, we need to make the adjustments that are necessary,” Isong said.

Executive Secretary, Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Mr. Olufemi Adewole, told THISDAY that the time of NNPC dictating prices for them has gone.

Adewole said: “NNPC will no longer dictate price to us. For now, we have not received any fresh allocation. If we get a fresh allocation based on the PFI cost, with the PFI cost, we will add distribution cost and we will get our own price because even if you ask NNPC or NMDPRA, they will tell you nobody is dictating prices for anyone.”