On January 5, 2023, the Minister of Finance, Budget, and National Planning, Zainab Ahmed, reminded Nigerians of one of the biggest developments to expect in 2023. This is the removal of fuel subsidy after June.
For now, all that Nigeria has budgeted for fuel subsidy until June is ₦3.36 trillion. This is only for the first six months of 2023.
Why is fuel subsidy being removed?
According to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), (an organisation that deals with the transportation, storage, and conversion of crude oil and natural gas), the current fuel subsidy regime is not sustainable. This is mostly due to the 66 million litres of Premium Motor Spirit (PMS) constantly being consumed by Nigerians. Not to mention the crazy amount of money being spent on maintaining the fuel subsidy.
The present Buhari regime has already spent up to ₦7.3 trillion on fuel subsidy. This was since he came into office in 2023. In August 2022, Ahmed also declared that Nigeria spends nothing less than ₦18.4 billion on petrol subsidy daily. Nigeria already has a ₦77 trillion debt. The fuel subsidy removal may possibly be what Nigeria needs to come out of its unending poverty.
But is fuel subsidy a good or bad thing for Nigerians?
Currently, Nigerians are paying an average price of ₦200/litre on fuel because of fuel subsidy. But how does the fuel subsidy work?
A fuel subsidy is simply the difference between the fuel price paid by the consumer and the cost of fuel supply.
Currently, the Federal Government pays ₦448/litre for the landing cost of petroleum
Because the Federal Government takes up this landing cost for citizens, we get to enjoy a total of ₦248 discount on every litre of fuel they purchase from the original price.
So what’s wrong with the fuel subsidy plan?
The fuel subsidy plan hasn’t been so smooth. This is due to the official statistic of 66 million litres of fuel being consumed as earlier mentioned.
This data in recent times has been largely criticised by several individuals and organizations. This includes the International Monetary Fund (IMF), and former Central Bank Governor, Sanusi Lamido Sanusi amongst many others who believe that Nigerians consume way less fuel than the official figures. They have asked the Nigerian National Petroleum Corporation (NNPC) to produce a proper financial audit backing their claims.
Fuel subsidy removal: to be or not to be?
After all the fighting and debate about our fuel consumption, the question remains — should this fuel subsidy be removed or not?
If the Federal Government should continue paying the fuel subsidy, we are more likely to run into more debt as a country. It is also a big drain on Nigeria’s revenue.
If it is removed without alternatives being put in place (such as local oil refineries), it would affect the lives of Nigerians. This is in terms of higher transportation fees, increased inflation rates, and ultimately the increase of ‘sapa’ or poverty rates.
Dear Nigerians, which of these would you say is the better poison?
