Fuel subsidy expenses have been on the rise in Nigeria. A total of N1.2 trillion was spent on fuel subsidy in 2021, and the NNPC has proposed N3 trillion for the same purpose in 2022, according to the Minister of Finance, Budget and National Planning, Zainab Ahmed. The proposed fuel subsidy expense for 2022 exceeds the amount spent in 2021 by 150 percent. President Muhammadu Buhari’s government promised to revive our ailing refineries, reduce expenses on fuel subsidy and make life much better for the vulnerable in Nigeria. This promise is yet to be achieved for seven years in office.
Nigeria has four refineries; Port Harcourt refineries (2), Warri refinery, and Kaduna refinery. The Port Harcourt refineries have a refining capacity of 210, 000 barrels a day, Warri refinery has a refining capacity of 125,000 barrels a day, and Kaduna refinery has a refining capacity of 110,000 barrels a day. The total crude oil refining capacity of the four federal government-owned refineries is 445,000 barrels per day. All the federal government refineries have stopped working since 2020, yet the Nigerian government spends a lot of money to operate them monthly. Nigeria exports a large volume of crude oil to other countries for refining and imports almost all the fuel consumed locally.
The refineries that have been in bad shape for many years could be seen as a plan of our economic managers to reap off the resources God has given to Nigerians to enjoy. Statistics have shown that our refineries were operating below their refining capacities before President Muhammadu Buhari assumed office in 2015. All these are targets to enrich a set of Nigerians at the expense of others.
When President Muhammadu Buhari was hustling to mount office in 1999-2014, he assured Nigerians that he would fix the four refineries within six months from the date he assumed office. We started hearing that Port Harcourt, Kaduna, and Warri refineries were about to start operation immediately after he assumed office in 2015. Nigerians got nothing but a total halt in the refineries’ operations and fuel price hike from N87 in 2015 to N167 per litre to date.
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Despite a large amount of money spent on fuel subsidy by the Nigerian government, the pump price of fuel is on the high side. The fuel price hike contributes to the high inflation rate in Nigeria. According to the National Bureau of Statistics (NBS), the inflation rate was 15.6 percent in November 2021. Inflation has reduced the value of money; Nigerians now pay almost three times the amount they paid for the same quantity of goods and services in 2014.
In Nigeria, the pump price determines the prices of other commodities in the market more than the exchange rate. The retailers and wholesalers take advantage of the fuel price hike to raise commodities prices beyond the reach of the common man. High prices in the market have eroded the consumption power of many Nigerians; the majority is malnourished. High prices have also dwindled savings further, which implies that investment and output will be low in 2022.
The big question is: Who will be more subsidised in Nigeria? The answer is straightforward. The president, the vice president, Senate president, deputy Senate president, speaker of the House of Representatives, the deputy speaker, other notable officers in the National Assembly, the 36 states governors and their deputies, other officers at the state level, the local government chairmen and their deputies will be more subsidised.
The Nigerian government is more subsidised because political office holders and appointees have more cars, huge salaries, and allowances, and they mostly move in conveys. They buy more litres of fuel at the subsidised rate than the vulnerable in Nigeria. The less-privileged in Nigeria who buys just a few litres to run generators due to epileptic power supply from the national grid is the one who is less subsidised by fuel subsidy payments.
Indeed, there is more to the high proposed fuel subsidy expense by the NNPC than what many Nigerians can perceive. Nigeria’s government should set up a monitoring mechanism to evaluate and check subsidies expenses to reduce subsidies payments.
Felix Ashakah is an economics lecturer at Western Delta University, Oghara
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