The Managing Director, International Monetary Fund (IMF), Christine Lagarde, recently advised the Nigerian government to discard spending on fuel subsidy and expend the money on health, education and infrastructural development.
“We believe that removing fuel subsidy is the right way to go,” Lagarde said.
At $.40 per litre, Nigeria is the 6th cheapest country to buy fuel and Africa’s number 3. According to globalpetrolprices.com, a website that tracks weekly prices of fuel in about 150 countries, the other 5 countries where you buy fuel at a cheaper price than Nigeria as at April 15, 2019 are; Venezuela ($0.01), Sudan ($0.13), Iran ($0.29), Kuwait ($0.34) and Algeria ($0,35).
It costs N389 for a litre of fuel in Ghana ($1.08), N292 in Republic of Benin ($0.81), N346 in Togo ($0.96) and N382 in Cot d’Ivoire ($1.06).
Despite Nigeria being Africa’s number one producer of crude oil, the country imports about 91 percent of its refined petroleum products’ need as the domestic refineries are inoperative
The Nigerian Labour Congress (NLC) has cautioned the Federal Government against implementing the recommendation of the IMF on the removal of fuel subsidy.
Oil workers under the auspices of Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) and the Petroleum and Natural Gas Senior Staff Association (PENGASSAN), also disagreed with the IMF advice to the Federal Government adding that such advice from the bank was an attempt to destabilize the nation.
Nigeria’s finance minister, Zainab Ahmed said there is no intention to remove fuel subsidy at this time.
“We have to find a formula that will work for Nigeria. And until we do that, we should not be contemplating removing the subsidy,” she said.
Thus, it is not if Nigeria will remove fuel subsidy but when?
The landing cost of fuel at N180, is N35 higher than the pump price of N145 per litre, Ibe Kachikwu, minister of state for petroleum resources, said.
A research report by BudgIT, a public finance focused non-governmental organisation, Nigeria has spent nothing less than N10 trillion on petrol import subsidy between 2006 and 2018.
“The 10 trillion consumed by the subsidy regime is sufficient to construct 27,000MW of electricity or build about 2,400 units of 1000-bed standard hospitals across 774 local government areas of Nigeria”, the NGO stated in its report.
Most parts of Nigeria pay more than official price of N145 per litre of fuel as it is mostly residents of Lagos and Abuja that enjoy the subsidy. This negates the often peddled argument that fuel subsidy is for the masses.
Government has been engaging in price fixing in the past instead downstream deregulation that is why despite several “removal” of fuel subsidies since 1991, it gets caught up in the web of crude oil price volatility and unstable naira.
Ayuba Wabba, NLC President, said the continued devaluation of the Nigerian currency created the impression of the existence of subsidy.
“As long as the value of the naira was left to market forces, the issue of subsidy would continue in the country”, Wabba said.
As the price of crude oil in the international market continues to rise, the first choice is either to keep the subsidies or raise fuel prices. If the government choses to raise fuel prices, the second choice to make is either to fix new prices or fully deregulate the downstream sector. That is the reality. It is time to bite the bullet.
FRANK UZUEGBUNAM
