Following Federal Government’s withdrawal of fuel subsidy last week, massive protests across various parts of the country rented the air giving its socio-economic implications the removal will have on Nigerians. However, full deregulation of the petroleum sector is believed to ensure sustainable petroleum pricing, writes ALEXANDER CHIEJINA
In Nigeria today, the most contentious issue is the removal of subsidy on Premium Motor Spirit (PMS) otherwise known as ‘Petrol.’ The withdrawal of fuel subsidy by the Federal Government last week generated heated debates by Nigerians from all walks of life, including the civil society groups and the Nigerian Labour Congress (NLC), owing to its implications on the nation’s socio-economic landscape.
Over the years, the Federal Government operated fuel subsidy with the aim of making petroleum products available to cushion the effect of actual market prices of the products on the general populace. According to reports by the Petroleum Pricing Regulatory Agency (PPPRA), the country consumes an average of 35 million litres of fuel daily.
As at August 15, 2011, the pricing template of the PPPRA showed that the landing cost of a litre of petrol is N129.21. It showed the margin for transporters and marketers as N15.49, bringing the expected pump price of petrol to N144.70. However, the initial official pump price for petrol is N65 per litre, a difference of N79.70, which the government subsidises.
While the FG spends over N1.4 trillion on fuel subsidy in the past five years, it also pays heavily to subsidise kerosene which is imported into the country through the Nigerian National Petroleum Corporation (NNPC), although the actual amount is not known.
Bearing in mind that fuel subsidy hasn’t benefited most Nigerians, several economists see the subsidies as hugely corrupt, wasteful and bled money from the treasury into the pockets of rich fuel importers. Giving this obvious reality, the Federal Government on January 1, 2012 dramatically announced the end of fuel subsidy, citing that the move became necessary since there was no provision for the subsidy in the 2012 budget.
The Government further disclosed the need to checkmate smuggling of the product, to avoid incurring debts that the National Assembly might not approve of, and moreso to save the economy from collapse.
Following the pronouncement, motorists who were travelling back to their various stations after the New Year and Christmas celebrations, were hit by sudden hikes petrol prices. Prices rose dramatically, ranging between N140 and N150 per litre, and at between N170 to N200 on the black market.
Reports reveal that commuters complained that motorcycle and minibus taxi fares doubled or tripled even as there is growing uncertainty that prices of goods will rise as well. Meanwhile, opposition leaders, unionists and local rights groups condemned the move by the Federal Government, which it believes, will inflate prices in a country considered expensive for majority of its citizens living on less than £1.30 a day.
Many fuel stations in Abuja, and the commercial capital, Lagos, were shut Monday last week while they adjusted their prices. Those that were open were jammed with queues and selling at prices of up to N150 a litre, up from a fixed price of N65 before.
“This is a bad new year present from the government. What next” said Sylvester Ezema, a motorist in Lagos, as a queue of about 30 cars formed behind him at the filling station.
Meanwhile, aggrieved Nigerians marched across major parts of the country such as Lagos, Kano, Kwara, Bauchi, Ondo, Benin, Abeokuta and Abuja to protest the removal of fuel subsidy which led petrol prices and transport fares to double. For instance, in Lagos, protesters marched pass petrol stations, shouted insults and tried to persuade them to close.
The protestors also disrupted traffic along Ikorodu, Maryland, Yaba, and other parts of the state, setting bon fires. Though not as busy as it normally is, many people were stranded as they could not afford the new transport fares after going away for the holidays.
At Abuja, policemen blocked Eagle Square, where protesters had planned to gather for a protest. They however fired tear gas to disperse people who had gathered chanting “Remove corruption, not subsidy.”
Nigeria is Africa’s biggest oil producer but most of the available 2 million barrels per day are exported in an unrefined state. The state of the nation’s refineries and infrastructure is such that it has to import refined products such as petrol, which is expensive.
With the price of fuel said to be cheaper in Nigeria than in neighbouring countries, the subsidy led to widespread smuggling. Nigerians are heavy users of fuel, not just for cars but to power generators that many households and businesses use to cope with erratic electricity supply.
Although previous governments have tried to remove the subsidy, it backed down in the face of widespread public protests and reduced it instead. The International Monetary Fund (IMF) has long urged the Federal Government to remove the subsidy, which costs a reported $8billion (£5.2billion) annually.
The government finance team led by the pair of Lamido Sanusi, Central Bank of Nigeria Governor and Ngozi Okonjo-Iweala, Minister of Finance and Coordinating Minister of the Economy, have long argued that removing the subsidy would free up money to invest in other sectors and relieve poverty.