Fuel subsidy removal in Nigeria, A recourse for dwindling economy

Fuel attendant selling petrol after fuel subsidy removal in Nigeria

The first day of the year 2012 marks a remarkable day in the subsidy regime in Nigeria. But, more importantly, in the aftermath of the fuel subsidy removal in Nigeria by then Johnathan’s administration. There are opposing reactions virtually from all corners of Nigeria including men and women in this current administration. They led protest tagged ‘Occupy Nigeria’. Enough of history, within four years and four months, Nigerians have learned and understood better on the subject of fuel subsidy. However, there seem to be commentators that are more political than rational from the current fuel subsidy regime.

Fuel subsidy removal in Buhari’s Administration

Many Nigerians have expressed their displeasures on the fuel price hike from ₦86.50 to ₦145.00 by the federal government in diverse versions. Buhari’s Administration decided to hike the cost of a litre of petrol by 67.4%. The Administration says the burden of subsidy payment is too heavy for the government to progress. Some people believe it is a good policy but fail to consult stakeholders enough before embarking on its implementation. While others see the hike not only as unacceptable policy but also as wrong timing. Every Nigerian is entitled to his/her opinion but rational ones are what will have positive impacts on the well-being of this country.

I believe there was no wide-range consultation before the government’s decision to remove fuel subsidy in Nigeria. However, to say it is a wrong time to implement this policy is out of place. Government receives waves of anger and backlashes because political actors in this administration were individuals who stopped the 2012 attempt by Jonathan’s Administration to remove fuel subsidy. Honestly, these individuals deserve all the backlashes.

However, 2012 was not a good time to remove fuel subsidy when compared with 2016. The reason is the difference in crude oil prices between 2012 and 2016. Buttressing further on both time, in January 2012 oil price was at US$110.99 per barrel. But, the price today is about US$48.00 per barrel despite the continuous rise in recent weeks.

It is better to remove the subsidy now

Given this backdrop, there is no better time than now for the government to remove fuel subsidy. The reason being the effect is less dramatic when compared with the period of high crude oil prices. Some other folks may argue that the logic of low price in the international oil market is not enough. And ask about the issue with the foreign exchange. Ok, let us talk about it a minute. If we continue to pay fuel subsidy, our external reserve depletes at a faster rate. Thus, low revenue as a result of declined price of crude will make fuel subsidy payment unsustainable. That said, this is the right time to remove this subsidy as a critical step to deregulating the oil and gas sector.

Our democracy is taking forever to learn the fundamentals of governance. It is evident that governments all over the world suffer backlashes and protests against fuel subsidy reforms. Examples are Indonesia and Malaysia, because of the stakes of various groups in the sector. Nevertheless, it is a total surprise that the government operates on the peripheral of this policy. What government needs to do is to tell Nigerians detail the consequences and benefits of the policy so they can weigh between the two for better understanding. For our leaders’ reminder, we are in deliberative democracy now.

In addition, no country develops based on ‘reactive policymaking.’ Rather an economy depends on quality forecasting and prompt response to the future occurrences before they become big issues. Therefore, our policymakers should learn how to envisage people’s reactions to policy implementation.

PIB and subsidy removal

So far, many Nigerians see fuel subsidy removal in the country as a viable step, but they think government direction is pointless. We do not need a vague statement of more revenue for capital projects from the government. However, a more specific statement like more capital projects that foster inclusiveness and promote sustainable development is what makes meaning to Nigerians. Without a concrete blueprint of economic priorities, the revenue gain from fuel subsidy removal will result in pains for Nigerian masses. Fuel subsidy removal is just a step toward deregulating oil sector. Furthermore, passing the Petroleum Industry Bill (PIB) should be the top agenda of both the executive and the legislative. A functional law and regulation for the oil sector should be the rationale behind fuel subsidy removal in Nigeria.

Unfortunately, this bill has failed to scale through the National Assembly over the years because of ‘cabals’ who work tirelessly for the bill not to see the light of the day. My question is what are the executive and the legislative doing to see the quick passage of the bill. Because without it the whole essence of deregulation is forfeited. In essence, the relevant institutions should fasten up the passing of PIB into law if not the benefits of fuel subsidy removal would not be optimized.

This policy action by the federal government is recourse for the dwindling economy; devalued naira and oil burst. Government has made us believe that this policy will boost the revenue needed to meet massive infrastructure needs. But, this lauded increase in revenue cannot meet up to five per cent of the infrastructural need of the country.


In brief, the government should use the gains from this policy to create enabling environment like passing the PIB into law and create workable project vehicles that woo private sector to investing in infrastructure development. Consequently, the benefits of fuel subsidy removal will accrue to all Nigerians. The policy can only be recourse if these measures are taken seriously by the government.

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