The Fuel Subsidy Removal is a belated but necessary decision.

As a New Year’s present of sorts to Nigerians in 2012, President Goodluck Jonathan announced the removal of the fuel subsidy designed to make the cost of fuel borne by customers as affordable. In this sense, the government pays the difference between the cost to produce and the cost charged to customers. Nigerians took to the streets in protest leading to the birth of the socio-political Occupy Naija movement while the government argued that the subsidy removal would allow it wriggle room to direct funds into other areas like health and infrastructure. With this change, fuel prices rose from N65 per liter to N141 per liter leading to a rise in the cost of transportation and other inflationary measures. The agitation continued, leading President Jonathan in a pacifist move to institute a panel mandated with overseeing the funds freed by the removal of the subsidy and promise an increase in transportation buses to reduce costs. He also brought back the subsidy in part causing fuel to be sold at N97 per liter. It would drop to N87 per liter in 2015 following the drop in the price of crude oil. However, in 2017 the cost of fuel rose to N143 per liter with the global crude oil pegged at 53 dollars per barrel.

However, last week President Muhammadu Buhari announced the removal of fuel subsidy regime with filling stations across the country selling fuel at N161 per liter.

Yesterday, Presidential Spokesman, Mr. Garba Shehu in a bid to help define the narrative explained why the fuel subsidy was removed saying; 

To stop the mismanagement of taxpayer money, eliminate corruption associated with subsidies on petroleum products, power, fertilizer among others, the administration took the decision to implement long-delayed reforms, withdraw and allow the market to determine their prices.

Subsidy removal in these sectors had long been foreseen by successive administrations as game changers in search of solutions to move forward with the nation’s development. These are reforms that are necessary and overdue. Blueprint upon blueprint, timeline upon timeline had come and gone but the courage to take bold decisions was not there.

Over the last few days, one claim acquiring a potent resonance with the online community, sections of the Labour movement, and the opposition are that the actions are ill-timed and ill-advised.

Although the removal of fuel subsidy comes across as tone-deaf amidst a global pandemic, he said it had to be done against all odds claiming that history will be kind to the President.

There is nothing new in the fact that the country is today fighting multiple challenges along with COVID-19, including low earnings, near-collapse of the oil market, floods, threats of terrorism and banditry but the challenges notwithstanding, a good government must make decisions for the people’s good.

History will be kind to President Buhari because, in addition to his amazing ability to command votes, he will be remembered as the President who made real contributions to economic and overall national development by eliminating the evils of corruption embedded in subsidies.

In these challenging times, the president is pushing development goals, not politics and history will judge him in favorable terms rather than his critics in the new media and the Opposition.

What the Government Can Do

The payment of funds by the government to subsidize the cost of fuel borne by customers was one of the rare “privileges” of the subsidy regime. However, it was largely unsustainable and by using the pandemic as a backdrop for its decision making, the government has taken advantage of the crisis to make tough but ultimately, necessary decisions. However, the government needs to do a better job in softening the blow. It can do this by ensuring its existing refineries are in operation whilst creating new ones. This could serve to potentially cut down the cost of refining crude oil abroad. Also, agencies in charge of transportation and trade should regularise the prices of fares to deter extortion of passengers and customers.