Nigeria’s oil and gas sector remains the bulwark of its economy, generating its highest foreign exchange and contributing to about 9 per cent of its entire Gross Domestic Product, GDP.
With over 100 million litres of daily consumption of fuel, as at May, and potentials of growing, the country’s domestic oil market boasts of ample consumer base as well as associated financial burden, as evident in successive years of funding fuel subsidy.
As a country stuck in inescapable realities of a monolithic economy, what happens with oil and gas affects everything, including goods and services. But one of the banes of stability in Nigeria’s economy is inconsistency in oil and gas policies.
Frequent reviews of policies affecting petrol prices trigger inflation, which has maintained a double digit since the present administration assume power in 2015.
Policies compelling citizens to pay more for petrol, diesel, kerosene and cooking gas are invitations to untold hardship, as high prices of petrol products trigger increase in transportation of goods and services affecting everyday life.
Whatever any expert may assume, increase in prices of goods and services has been Nigeria’s experience ensuing from subsidy removals. In March 2020, the country attempted deregulation of the downstream sector of the petroleum industry, after reducing the pump price of petrol to N125 per litre from N245, following a drop in crude oil prices, which only lasted till June.
However, in April 2021, the government confirmed Nigeria’s return to fuel subsidy for, at least, the next six months and voted approximately N120 billion to subsidise the product per month, totalling N720 billion, which authorities insist is not sustainable as the huge financial burden poses dire implications for the country’s struggling economy.
Between January and October 2021, the Nigerian Government has spent N1.03 trillion on fuel subsidy. In December, the Nigerian National Petroleum Corporation, NNPC, said about N199 billion would be deducted for fuel subsidy. But more could be spent to cushion the impact of a full deregulation in 2022.
Instead of openly describing the excess cost as fuel subsidy, the government, through the NNPC, has described it as ‘under-recovery’ as part of its operational cost.
As Nigerians brace up for another round of subsidy removal in 2022, there are genuine fears that it could result in another policy somersault while its negative impact remains indelible in the country’s economy.
According to the Minister of Finance, Budget and National Planning, Zainab Ahmed, subsidy will be replaced with a monthly N5000 transport grant to about 30 to 40 million Nigerians who make up the poorest population of the country.
Although government has a duty to provide policy direction on the economy, this plan bears the semblance of an absurd policy. While the removal of subsidy remains contestable, Nigeria is obviously not known for maintaining accurate demographics and one wonders where it would harvest the data of the very poor to give monthly transport grants. What the policy suggests is a pandering to the whims and caprices of external forces who are unconcerned about the plight of ordinary Nigerians.
Again, Nigeria’s population is estimated at 200 million with over 60 per cent classified as poor. Narrowing assistance to 40 million amid high inflation will worsen the poverty among over 80 million and cause more damage to the economy. How does it make sense that you take money from a public investment that benefits everybody and give it to a few individuals while others suffer?
Of course, government will not appear to have shown enough concern over the sufferings of Nigerians. As evident in its several attempts to remove subsidy which only succeeded in increasing fuel price and skyrocketing the prices of goods and services, it has a high task at convincing Nigerians of its genuine efforts to assuage their suffering and grow the economy.