Unpredictability over Christmas as Nigerian govt contemplate subsidy removal

As Christmas is approaching, beautiful decorations have started appearing in major cities, however, one other thing that has started appearing are long queues at filling stations.

As the federal government mull removal of controversial fuel subsidy, filling stations in Abuja have started having long queues in their stations.

Policy somersault on subsidy by Buhari’s administration

Muhammadu Buhari’s administration has struggled to deal with fuel subsidy. Several times, the government had announced the removal of the subsidy regime, only to make a U-turn and continue to pay subsidies, which is now called under-recovery.

In 2016, the government had announced the removal of the subsidy regime when NNPC became the sole importer of PMS. This then changed subsidy to “under-recovery.” However, the price of PMS was jacked to N144 per litre from N93 per litre.

Amid the pandemic, the government again announced the removal of subsidy amid the collapse of the price of crude oil in the international market as the country implemented COVID-19 measures. The price of PMS declined to N118 per litre. Ultimately, it skyrocketed to N162 per litre as most countries reopened their economies and oil rebound.

The inability to maintain a position on subsidy could be traced to the prior position of Mr Buhari on the matter of subsidy. In 2011, as candidate of the CPC, he had said, “Nigerians are being deceived on the issue of fuel subsidy, The federal government takes out fuel for refining, only to come back and talk of removing the subsidy. That is nonsense and an attempt by a clique with the PDP-led federal government to siphon the proceeds to be realized from the removal of oil subsidy”.

Mr Buhari, who is the substantive Minister of Petroleum Resources, later backed the removal of subsidy after he emerged as the President.

Ever since, the administration has been grappling with subsidy. Last year, the Group Managing Director of NNPC, Mele Kyari, said Nigeria consumes as high as 103 million litres per day. The revelation led to a policy of preventing sales of fuel to border communities along the Nigerian border corridor.

It would be recalled that the Comptroller General of Customs, Ali Hameed, had during an appearance before the House of Representatives Committee on Petroleum, said the policy of shutting down border will not address smuggling, rather, the NNPC should establish NNPC fuel retail outlets in Neighbouring countries, where they can sell fuel.

Christmas and fuel subsidy

The Buhari’s administration had pride itself on being able to ensure PMS is always available during the Yuletide season. However, this recent plan of subsidy removal is casting a shadow on the season.

2021 Christmas is already bedevilled by series of issues as earlier reported by the newsmen. Due to the Omicron variant and the travel ban by the United Kingdom and others, Nigerians in the diaspora are going to be unable to visit their families, while Nigerians in Nigeria, are equally wary of travelling due to the general insecurity across the country.

An economist, Abiodun Ayangbemi, who spoke with the newsmen, explained that as it stands, two factors make the timing of the removal ill-advised.

He said, “With the rate of inflation in the country, particularly food commodities,” adding fuel subsidy removal to the equation will be detrimental because “transportation is a major determinant of prices in Nigeria.”

However, he agreed that most often, the rich who have the money to benefit are the ones benefitting from the removal of subsidy.

A transport operator, Idowu Rasak, said even without the fuel scarcity scare, yuletide seasons always experience a spike in the cost of transportation because demand outweighs supply. He noted that with the rate of bad roads, most drivers can only make a single journey per day.

“Passengers are concerned about night travelling because of kidnappers. In the past, some drivers can travel to the East, rest for some hours and still do night journey back to Lagos or Abuja, some will even go back empty, knowing fully well that passengers are waiting for them at the other end.

“But the risk now is huge. Although, as transporters, we still ply those roads every day because we have no other alternatives.

Flight too dare to try

The other option for most Nigerians is travelling by air, which is an option out of the reach of many Nigerians.

A quick check by the newsmen reveals that the cost of an air ticket from Lagos to Calabar ranges from N42,000 to N60,000. And in some instances, some of the tickets have been sold out completely.

“For most Nigerians, flight is a luxury, not necessity. But with the level of insecurity on our roads, the state of the roads and the accident rate, ordinarily, flight would be considered, but as a family man with children, you will have to buy tickets for three or more,” Yusuf Lateef, an economist said.

He added that, “even the current capacity of domestic flights is limited. It cannot handle surges. Very few Nigerians are using flights in Nigeria, imagine a 20% surge in passengers, lots of airlines will struggle to meet demands.”

N5,000 to 40 million Nigerians

Despite the consequences of subsidy removal, the government’s response is to give 40 million poor Nigerians N5,000 to cushion the effect of the removal.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, had last month announced that the government would pay 40 million Nigerians N5,000 each as transport grant to cushion effects of subsidy removal.

Mr Yusuf said the policy shows that the government seems not to understand the ramifications of subsidy and its impact on the economy.

“When fuel is selling for N345 per litre, the multiplier effect will be so significant while N5,000 will be insignificant,” Mr Yusuf said.

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