Nigeria’s next president would have to confront serious challenges from day one, and none more contentious as the removal of petrol subsidies, which cost the country over N18 billion daily.
Previous governments have balked at completely removing subsidies, only resorting to raising the pump of a litre due to concerns about labour strikes and that it will stoke runway inflation.
Goodluck Jonathan, former president of Nigeria, attempted to remove petrol subsidy in 2012 but met backlashes and protests nationwide.
More than seven years after taking over from the former administration, President Muhammadu Buhari, who said in 2011 that “if anybody says he’s subsidising anything, it is a fraud” has spent N7.3 trillion on subsidies, analysis shows.
Last year, Buhari said the federal government could no longer keep up with the subsidy. N3.6 trillion was budgeted for the first half of the year 2023 alone.
Analysts say the removal of petrol subsidy should be gradual in phases and not completely at once. They urged the next government to create a realistic plan and orientate Nigerians about the need for a paradigm shift.
Labour unions have argued that removing subsidies will raise the cost of living, insisting the government must fix its refineries before there can be a discussion on subsidy removal.
“Subsidy will remain until the new government comes in, after the general elections. The government must bite the bullet rather than the several postponements seen by the outgoing government for obvious political reasons. It will be a new administration, and such decisions must be made quickly and swiftly,” said Joshua Olorunmaiye, team lead/executive associate, energy and natural resources at Bloomfield LP.
According to Olorunmaiye, the government’s economic team must have a clear plan, gain the trust of people and have programmes to cushion the effect on the economy.
“Hence the need to first have a plan for other sectors, such as transportation and agriculture, that cushions the effect of the removal, and secondly, consistently engage Nigerians on the need for the removal, such as the about N6 trillion in revenue likely to be gained.”
Promise Nwogu, co-founder and president of African Youths in Energy Network, said: “A gradual removal of, say, 50 percent or 30 pecent, whatever percentage of the subsidy, will allow people to start adapting to the cost of petrol.
“Concerning adaptations, Nigerians can learn to leave their vehicles at home and use public transport. The government can unlock capital for infrastructures like public transport, refineries and power plants, which will allow for the 100 percent removal in future.”
Ndubuisi Okereke, senior lecturer in Petroleum Engineering Department at the Federal University of Technology, Owerri, added that subsidy is as good as off.
He said: “There is no better time to remove it officially than now. We have significantly adapted to over N300 petrol pump prices in the South-East and South-South.
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“The petrol subsidy removal process can be completed in two phases, and part of the saved proceeds should be used to build a new Federal Government refinery and not refurbish the existing ones.”
“The first phase is the removal of the subsidised bill of landing cost while phase two will be the removal of in-country transport/logistics cost. The old refineries have siphoned so much money in the past years, yet no positive results,” he added.
According to Okereke, sometimes old equipment comes with too many problems.
“I also suspect some components may be obsolete and not adaptable to new parts,” he said.
Last week, Mele Kyari, group chief executive officer of the Nigerian National Petroleum Company Limited said N400 billion was spent on petrol subsidy monthly.
He said: “There is subsidy on the supply of petroleum products, particularly petrol, into the country, noting that as of Tuesday last week, landing cost was around N350 to a litre, and it was transferred to customers at N130 per litre leaving a deficit of N202.
“By base computation, N202 multiply by 66.5 million litres multiply by 30 will give you over N400 billion of subsidy every month; there is a budget provision for it, but it is also a drain on our cash flow when we do not get refunds from the ministry of finance.”
