• Thursday, December 07, 2023
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The fuel price hike: Has FG quietly removed fuel subsidy?

Removing fuel subsidies: Costs, benefits, and next steps

In Nigeria, the fuel price hike has persisted after six consecutive weeks. The average price of fuel is N250 per litre. Many Nigerians cannot afford the current fuel price and are asking if the Federal Government (FG) has quietly removed fuel subsidy.

The prevailing fuel situation in Nigeria has caused many households a lot of pain. The majority cannot afford the current fuel price due to poverty, while life is unbearable for many others who have reduced the quantity they usually consume. The vulnerable in Nigeria are groaning in pain; they can no longer put fuel in their smallest-sized generators to generate power for themselves in the absence of power supply from the national grid.

Many Nigerians are experiencing difficulties sourcing fuel for domestic use. Many people rise very early in the morning to queue up at filling stations to get fuel in gallons, and some other persons carry their generators to filling stations to buy fuel.

The fuel price hike resulting from fuel scarcity has affected the prices of other commodities in the market. Fuel price is one of the determinants of inflation in Nigeria, and as should be expected, the price of every commodity in the market has increased since the fuel scarcity and price hike returned to Nigeria in the past six weeks.

Read also: Airline operators may get license to import aviation fuel

Transporters have taken undue advantage of the prevailing situation in the country by increasing the cost of intra-city and inter-city transport fares by 50 percent. Wholesalers and retailers who pay higher transport fares in stocking their warehouses and shops pass the burden on the final consumers.

Many Nigerian consumers cannot buy the same quantity of foodstuff they had before the prevailing fuel crisis in the country. Pains and poverty are visible on the faces of many Nigerians following the increased costs of commodities in the market. Many Nigerian households are malnourished and impoverished because prices are no longer the same.

Fuel scarcity in the past resulted from either an increase in pump price or subsidy removal. The current fuel scarcity in the country resulted from the importation of adulterated fuel and the introduction of N500,000 trans-shipment charges by the Nigerian National Petroleum Corporation (NNPC). According to the NNPC, the introduction was to help the corporation recover its operational cost since the recently passed Petroleum Industry Act (PIA) had made it a limited liability company.

Mele Kyar, the managing director of the NNPC, defended the importation of adulterated fuel by saying that the usual quality inspection protocols employed in both the loading port in Belgium and discharge port in Nigeria did not include the test for the percentage of methanol contents.

The importation of adulterated fuel by the NNPC caused damage to many vehicle engines in the country. Some of the owners of the damaged vehicles are currently experiencing various challenges. The majority of the car owners may not claim damages from the NNPC because they lack evidence of buying adulterated fuel from the filling stations.

Many Nigerians are expressing different opinions on the current fuel situation in the country. Some Nigerians claimed that the prevailing fuel situation could be a deliberate act by the government to quietly remove the fuel subsidy that Nigerians rejected earlier. Others are saying that it could be a plan by the government to generate funds from the public.

The question “who is losing and winning from the prevailing fuel situation in the country” can be answered with apparent ease. The NNPC, businessmen/women, and petroleum marketers are winning while the vulnerable Nigerians are losing out. The NNPC, businessmen/women, and petroleum markets are making more money from the prevailing fuel price hike at the expense of the vulnerable whose incomes keep losing purchasing value.

The burden of fuel scarcity is borne more by the poor, thereby increasing their suffering and their poverty level. The prevailing fuel price hike has led to an increase in intra-city and inter-city travel costs, production costs, and the prices of food items in the market. The current fuel situation has affected the level of output in the country. There is an urgent need for the government to intervene in the current fuel situation challenging the county.

Felix Ashakah is an economics lecturer at Western Delta University, Oghara