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Fuel Reform That Is Making Nigerians Cry

Feature Article Fuel Reform That Is Making Nigerians Cry
FRI, 29 SEP 2023 LISTEN

Attempts made by previous Nigerian administrations to remove the fuel subsidy led to protests and strong opposition, including from the current President, Bola Ahmed Tinubu. Upon assuming office on May 29, Tinubu's government decided to abolish the fuel subsidy in Nigeria, despite his previous criticism of then-President Goodluck Jonathan for doing the same in 2012 without considering the challenges faced by Nigerians who rely on fuel for their daily economic activities. The increase in fuel prices affects all sectors of the economy. Tinubu was aware of the non-functioning state of Nigeria's refineries, which necessitated the continuous importation of refined petroleum. ODIMEGWU ONWUMERE reports

Asiwaju Bola Ahmed Tinubu, profoundly viewed as a political trailblazer and talented planner, is generally perceived as a pioneer among pioneers in Nigeria's political circle. He is regarded for his patriotic energy, strategy, and magnanimity, as confirmed by the enduring legacies he has laid out, especially among the individuals who have benefited or keep on profiting from his impact. During his eight-year residency as Governor of Lagos State (1999–2007), Asiwaju Tinubu started the development of new streets to address the developing populace of the state. Tinubu, known for his unwavering determination in politics, was successfully re-elected as governor in April 2003, alongside his new deputy governor, Femi Pedro. However, there are significant concerns about the affordability of education, food, and healthcare during his presidency these days due to his government's policy of removing fuel subsidies.

The President Tinubu-led government didn’t propose any solutions to mitigate the negative effects of the fuel subsidy removal decision on individuals with limited income. Nigeria's newly elected President Tinubu praised the outgoing administration for its decision to gradually eliminate the petrol subsidy system, which he believed had shown a growing preference for the wealthy over the disadvantaged. According to what Tinubu said on a Democracy Day broadcast, “Increasing subsidy costs can no longer be justified due to resource depletion. Instead, we will redirect funds to improve public infrastructure, education, health care, and employment opportunities, which will ultimately benefit millions of people and significantly improve their quality of life. I recognize that this decision will place an additional burden on our people as a whole. I feel your pain.”

He was of the opinion that importing fuel was straining the local currency and that the subsidy was primarily benefiting influential individuals, leading to opportunities for profiteering and illegal petrol transportation to neighboring countries. Nigeria did not benefit from the increase in oil prices because of low oil output and the high expenses associated with fuel subsidies. The agents of Tinubu stated that he directed the national economic council, chaired by the vice president, to develop policies to minimize the impact of the fuel subsidy, but no specific timeframe was mentioned. The council planned to brainstorm and determine the appropriate measures and support for Nigerians, but there was no clear strategy in place to provide relief to the citizens. According to some of our interviewees, Nigeria lacks proficiency in implementing effective measures to alleviate the situation, and they criticized the government for not offering necessary relief before removing the fuel subsidy. They expressed concerns that this would worsen the existing poverty problem in Nigeria.

Nevertheless, in November 2021, the Maj. Gen. (Rtd) Muhammadu Buhari-led federal government declared its intention to eliminate the fuel subsidy and substitute it with a monthly transportation allowance of N5,000 for impoverished Nigerians. But the government then subsequently halted the implementation of this plan due to the threat of widespread protests by the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC). For many years, the Nigerian government has subsidized fuel and maintained fixed retail prices for petroleum products. The previous governments consistently argued that the subsidy on gasoline was unsustainable due to the excessive amount of money expended.

Nigerians were informed that over N4 trillion was spent on petrol subsidies last year, surpassing the government's expenditure on education and healthcare combined. Tinubu praised the previous administration, led by Maj. Gen. Buhari, for only providing budgetary allocation for petrol subsidies until June 30th, leaving the final decision on the matter to the incoming administration, which Tinubu is now chairing, and he announced the removal of the subsidies on May 29th.

While Tinubu was examining the benefits of removing the subsidies that will result from his extraordinary policy, Amnesty International had a contrasting perspective, stating that Nigerians should not bear the burden of years of political and economic mismanagement of the subsidy program. The global organization, renowned for safeguarding human rights, contended that the Nigerian government must promptly implement measures to safeguard the rights of those most impacted by the elimination of fuel subsidies and prioritize addressing prevalent hunger, increased unemployment, and the steep decline in living standards.

There was apprehension that while all nations, including Nigeria, must eventually eliminate financial assistance for fossil fuels to fulfill their obligations in addressing the climate crisis, they should not do so in a manner that hinders economically disadvantaged individuals from attaining a satisfactory standard of living. It is on record that fuel subsidy became a popular topic in Nigeria in January 2012 when then-President Goodluck Jonathan announced the removal of the subsidy. This led to an increase in fuel prices and sparked protests called #OccupyNigeria. The labor unions were angered by the removal of the subsidy but temporarily suspended their indefinite strike after negotiations with the government. Among their demands was a more than sixfold increase in the minimum wage. This issue recently caused the Concerned Ijaw Transformation Ambassadors (CITA) to demand apologies from prominent figures like Tinubu for their criticism of the obstructed subsidy removal in 2012, while they have removed it today.

It was surprising that while Tinubu kicked against the impeded removal of fuel subsidies during the Jonathan presidency, on his inauguration on May 29, 2023, he made an announcement to abolish petrol subsidies. The reasoning behind this decision, he said, was to redirect financial resources towards other sectors of the economy, promote increased production of petroleum products by domestic refineries, reduce Nigeria's dependence on imported fuel, stimulate employment, allocate funds for critical public infrastructure development, decrease the budget deficit, achieve a future budget surplus, lessen government borrowing, tackle corruption related to fuel subsidy payments, foster competition, rejuvenate domestic refineries, and alleviate strain on the exchange rate.

The drawback of this choice has been a decline in economic growth, a rise in inflation, an increase in poverty levels, a surge in fuel smuggling, a spike in crime rates, an escalation in petroleum product prices, and a loss of jobs within the informal sector. Without any feeling today of licking his vomit, the former national leader of the Action Congress of Nigeria (ACN) had accused the Jonathan presidency of violating their agreement with the people by abruptly eliminating fuel subsidies. On the other hand, he proposed a solution to the crisis for Jonathan: if the subsidy must be removed, it should not be done all at once, as Tinubu doesn't support it today. Instead, it should be done gradually, with each stage of removal carefully measured and confirmed for promised benefits before proceeding to the next stage. Tinubu believed that the sudden and complete removal of the subsidy by the Jonathan government should be reconsidered. In his own words, he stated that if the funds were to be used for other programs, these programs should be implemented simultaneously with the subsidy. As more of these programs become available, the subsidy can be gradually lifted. This approach would ensure that the government does not reduce its overall spending on behalf of the public, thus upholding the core principle of the social contract.

Tinubu, who removed the fuel subsidy today without recourse to what he lampooned Jonathan for in the past, stated that the then President Goodluck Jonathan was beholden to misguided economic policies, and he warned that the populace would subsequently be subjected to even more suffering. Tinubu also claimed that the crisis would be associated with Jonathan's name and would serve as his enduring legacy. Since the removal of the fuel subsidy byTinubu, Nigerians have faced difficulties due to the higher prices of goods and services. The Nigerian National Petroleum Company Limited (NNPCL) instructed its outlets to sell petrol at significantly higher prices.Tinubu’s policy has brought untold hardship to the country today as compared to the 1970s, when the Nigerian government implemented an oil subsidy as a means of lessening the impact of surging global oil prices and helping the citizens. The subsidy was officially established by the Olusegun Obasanjo military regime in 1977 through the enactment of the Price Control Act, which governed the pricing of various commodities, including fuel.

Conversely, President Tinubu claims that the government has saved over one trillion naira as a result of the subsidy removal and plans to provide low-interest loans to businesses. The government also intends to allocate funds for the acquisition of CNG buses to be distributed to transporters across Nigeria. According to the World Bank, the number of poor Nigerians has increased to 93.8 million as more than four million individuals fell into poverty between January and May this year, primarily due to high inflation rates.Today, due to their high fuel consumption, many Nigerians, especially those with cars that have engine capacities above four plugs, have decided to pack them away. It is evident that Tinubu's series of reforms in his initial weeks in office are negatively affecting the poor citizens of Nigeria, and there seems to be no relief in sight. The expenses for electricity generators have skyrocketed. Tinubu dismissed Godwin Emefiele, the governor of the Central Bank of Nigeria, as he believed that his proposal to unify the country's multiple exchange rates would be sufficient. Although economists widely praised this decision, it has resulted in an uncontrollable increase in prices and subsequent hardships.

The World Bank was apprehensive that if the government does not offer any relief measures to mitigate the impact of the fuel subsidy removal, an additional 7.1 million people in Africa's most populous country are expected to become impoverished. Justifying his dimwitted policy, which he frowned at when Jonathan once initiated it in 2012, Tinubu stated that the elimination of subsidies today occurred due to the fact that Nigerian governments, over the course of many years, had maintained low petrol prices in Africa's largest economy. He believed that, however, this practice ultimately became more expensive for the nation. According to him, in fact, the government expended $10 billion last year alone, resulting in larger budget shortfalls and an increase in government debt.

Nigeria plunging into the murky waters of fuel subsidy elimination during the Tinubu presidency, presently, the exchange rate for the Nigerian Naira against the US Dollar in the black market fluctuates between ₦980 and ₦990, with an average of ₦986.67. Numerous universities and other institutions of higher education throughout the country have hiked their tuition fees by up to 100%. In Lagos, the state government, in collaboration with the Federal Road Safety Corps, declared that vehicle owners would be mandated to pay a new charge of N1,000 for a certificate of ownership. Electricity companies notified their customers about an upcoming tariff increase of nearly 50% in July. However, this plan was put on hold after the Nigerian government stated that it had not authorized the electricity tariff.

This is occurring in a country where the national minimum wage for federal workers in Nigeria reached 30 thousand Nigerian naira (NGN) in 2022, which is equivalent to about 65 U.S. dollars. On average, the monthly cost of living for an individual in Nigeria was 43.2 thousand NGN in 2020, while this amount rose to over 137 thousand NGN for a family. The minimum wage of 30 thousand NGN was established as law in 2019. Critics have consistently claimed that the removal of fuel subsidies will further weaken the purchasing power of Nigerians and impoverish more citizens in a country where nearly half of the population is poor. Therefore, you can imagine the salary earned by Nigerians in a month and consider them purchasing fuel at such a high price while also maintaining other necessities in a country where only 45% of the population is connected to the energy grid and power supply difficulties are experienced around 85% of the time, being almost nonexistent in certain regions. On average, the daily power supply is estimated to be four hours, although there can be several days without any power at all.

Days after President Tinubu announced the removal of fuel subsidies, the Nigeria Labour Congress (NLC) stated that it would organize nationwide protests unless the government reversed the new pump price. Joe Ajaero, the leader of the NLC, also demanded an inquiry into the alleged fraudulent practices within the subsidy system. Eventually, the labor leaders and the Nigerian government reached an agreement, which involved reviewing a proposal for wage increases and implementing other measures. Subsequently, Ajaero's residence in Lagos was completely destroyed by a fire. The patterned-like Socialist Labour Party claimed that this was a deliberate act of arson targeting Ajaero and the entire labor movement in response to their efforts to oppose the government's harmful actions.

While Nigerians argued, Tinubu, in July 2023, acknowledged the difficulties caused by the removal of fuel subsidies and assured that this decision was in the best interest of the nation, particularly in securing future prosperity. During a live appearance on Channels Television's Politics Today, Femi Falana, SAN, attributed the hardships caused by the fuel subsidy regime to the "irresponsibility" of the ruling class. He specifically pointed out the alleged fraud committed by beneficiaries of the policy and the failure to fulfill the promises of reforming the oil sector. As a result, the human rights lawyer emphasized the urgent need for the federal government to take swift action to alleviate the suffering of its citizens. Tinubu, who was joined by 18 governors from the Class of 1999 at the Presidential Villa, urged Nigerians to be more patient. He guaranteed that measures were being taken to address the consequences of fuel subsidy removal through the development of a comprehensive plan for assistance. Tinubu emphasized that the government would intensify its efforts, expedite the process, and establish a foolproof social security system that would not be compromised, especially in terms of cash transfers.

In August, the Federal Government announced a N5 billion aid package for every state in the country, including the Federal Capital Territory, to mitigate the impact of abolishing the petrol subsidy. The governor of Borno State, Babagana Zulum, made this announcement in Abuja. Mr. Zulum spoke to reporters at the State House at the end of the National Economic Council meeting, which was chaired by Vice President Kashim Shettima. The governor expressed that the NEC had significant concerns about the rising cost of food items and transportation as a result of the subsidy removal. To alleviate the effects of the subsidy removal, the central government distributed five trucks of rice to each state. However, before the planned removal of the petroleum subsidy in June, the Federal Government revealed that it had obtained $800 million in funds from the World Bank to provide assistance to more than 50 million Nigerians. As expected, there have been varying opinions about this development, with some critics arguing that the generosity may not achieve its intended purpose.

It was vital for the governing All Progressives Congress (APC) to comprehend the repercussions of eliminating the fuel grant. Garba Shehu, a senior special assistant to former President Buhari, declared in June that if the subsidy on Premium Motor Spirit (popularly called fuel subsidy) had been abolished during the Buhari administration, the current President, Tinubu, would have lost his bid for the presidency. It was, however, surprising to hear that both Tinubu and his APC, who previously praised Buhari's presidency for its “good governance and financial appropriation,” claimed in September that the Federal Government, now under President Tinubu, had inherited an economy in poor condition from Buhari. They however stated that within Tinubu's first 100 days in office, the narrative had changed.

The FG described the removal of fuel subsidies as a long-standing issue that had plagued Nigeria, but also acknowledged that despite the challenges, the President had initiated measures for national transformation, growth, and overall development. Conversely, in a statement titled "Why did it take the new Tinubu/Shettima presidency weeks to abolish the petrol subsidy when Buhari didn't do so for years fails to ask the right question," posted on his official Twitter handle @garbashehu, Shehu highlighted that tensions were high before the 2023 presidential election in which Tinubu was declared winner, and Buhari did not want to worsen the situation.

Shehu also mentioned that the APC had an upcoming election and Buhari did not eliminate the subsidy in his final days as president, considering that other subsidies, such as diesel and hajj/Christian pilgrim subsidies, had already been eliminated. While the Tinubu presidency is receiving praise for its government, which has led Nigerians to call for a change in government, the Socio-Economic Rights and Accountability Project (SERAP) has filed a lawsuit against President Tinubu.

The lawsuit is based on his failure to disclose the spending details of approximately N400 billion saved from the removal of subsidies on gasoline. This lawsuit comes after reports that the federal government saved N400 billion within four weeks of implementing the subsidy removal policy. In the lawsuit, SERAP is requesting an order of mandamus to compel President Tinubu to publish the spending details of the N400 billion saved and provide information on how these savings will be allocated to specific projects. The government was faced with the choice of either continuing the subsidy, which would deepen an unsustainable fiscal deficit, or removing it and risking potential social and economic unrest.

It is becoming clear in Nigeria that those who initially supported the removal of fuel subsidies are now realizing the significant impact it has had on the country and are urging the government to take immediate action to alleviate its effects. For one, the Christian Association of Nigeria in the 19 northern states and the FCT have expressed their concerns about the harsh economic conditions following President Tinubu's decision to abolish fuel subsidies. Unemployment, corruption, a lack of economic diversification, income inequality, laziness, and an inadequate education system are some of the main factors they have identified as contributing to poverty in Nigeria.

Falana acknowledged that there is indeed a lot of corruption in the management of fuel subsidies and called for a government investigation. Specifically, the Northern CAN has urged President Bola Tinubu and the governors of all 36 states to address the economic and social issues affecting the country and meet the expectations of Nigerians.

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Started: 02-07-2024 | Ends: 31-10-2024

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