The Ravaging Fluctuation Of Fuel Price And Subsidy Removal -By Salisu Abdulazeez Lawal

Introduction:

I am utterly disillusioned as a person with the idiosyncrasies of the New Nigerian Government and the unfavorable modus operandi of the petroleum dealers. The question always rumbling in my mind is on “how could it be explained to the citizens and upcoming generations that in the inauguration speech of a new transition marks a radical diminution in the general welfare of the people.” “A Renewed hope” veil with a despairing garment. There are many cacophony on the significance of the governmental action as many opined that the fuel subsidy is a mere scam and complicated hoax which only makes the rich become richer while the poor suffer endlessly. But to objectively dance in the theater of reality, any governmental action that place the poor masses at the receiving end is an economic injury.

Background:

Fuel Subsidy has been an existing and integral part of the Nigerian economy by independence and its aftermath. Subsidy and its phase-out have been observed by different regime and governance. To divulge on the advantages of subsidy removal on the Nigerian economy is evident to make reference to an essay I read on “the importance of subsidy phase-out on the Nigerian economy” by Isiaq Nasirdeen Tinuola where he reiterated on some given points:

1. Fiscal Sustainability

The continuation of subsidies in Nigeria is a drain on government resources, leading to a fiscal deficit. According to the IMF, the removal of subsidies in Nigeria could help save about 0.5% of the country’s GDP. By phasing out subsidies, the government would be able to channel the saved resources towards other developmental projects such as improving infrastructure, healthcare, and education. This will ensure the government has adequate resources to finance its budget without relying on external loans or grants.

2. Promotes Efficiency and Competition

Subsidies lead to market distortions, making it difficult for businesses to operate competitively. For example, fuel subsidies limit competition in the petroleum industry, leading to a monopoly, and discouraging private investment. By removing subsidies, the government will promote private sector participation in the oil and gas sector, leading to increased efficiency and innovation. Similarly, in relation to the phasing out of electricity subsidies, it will lead to increased investment in the power sector, bringing about uninterrupted electricity supply and boosting economic activities.

3. Social Justice

Although subsidies aim to support the poor, their implementation has been inefficient in Nigeria. Studies show that only a small percentage of the subsidy benefit reaches the poor, while the rich benefit more. In contrast, the removal of subsidies will lead to the pricing of essential commodities that reflect the market cost, leading to a reduction in wastage, improved service delivery, and redistribution of wealth equitably. This will ultimately promote social justice in Nigeria.

4. Reducing Corruption

Subsidy regimes in Nigeria have been marred by corruption, leading to a loss of billions of naira to the national treasury. Phasing out subsidies will help eliminate the legal and illegal diversion of subsidised products for private gains. It will also reduce the pressure on regulatory agencies and create room for them to focus on their core regulatory functions effectively.

Also, it was documented by The Nigeria Extractive Industries Transparency Initiative (NEITI) that between 2005 and 2021, Nigeria has spent over the sum of N13.697 trillion on subsidy payments in order to support the availability of necessity goods and services such as fuel, electricity and food. The organization noted that the worth of the money spent would build new refineries with a joint capacity of 1.350 million barrels-litre per day.
These points raised above clearly showcase the despairing drawbacks of subsidies on the Nigerian economy.

Challenges on the subsidy removal.

However on the other side of the mirror, there are many challenges on the subsidy removal on the Nigerian economy. The current gravity of hardship arouse by the governmental action can be a great course of criticism to the subsidy removal. Life becomes so miserable of adversities at its brim. Fuel can be termed as a necessity good maintaining an elastic supply and a perfectly inelastic demand where no matter the change in price, demand remains unaffected.

Life without it can’t be viable in this modern society. We need fuel for our cars, motorcycles, generators, tricycles, lorries as well as all dimensions of living. Come to think of the effects of this ravaging fluctuation of fuel price on the Nigerian economy. To assert in the most simplific way, when fuel price increase, the price of goods and services you can ever mention or imagine directly increase with an inverse relationship. That’s to say, “A hike in fuel price brings about such in all goods and services involved.’’

Also, there is a devastating reduction in the standard of living as the price of fuel is doubled-multiplied. Before a new transition, the price stocks at #250 per litre while the Renewing hands set the price at #550 per litre. It began like a drama, all sorts of dramas which seem to have a hallucinogen and lugubrious end. In just a day on a new transit,
The price is increased by #300 per litre, labeling hardness on every sketch. it’s the fuel subsidy removal that serve as the demon causing all these devastating effects.

Conclusion:

A vividly portrait of the inner and outer effects of the subsidy removal have been depicted in this piece.
It is now left for the reader to assess and evaluate the points raised in order to take a stance.

But who is to be blamed and held responsible?, A question asked on every angle of the economy.
To declare the new government is something understandable. But come to think of the obscure cause. The petroleum dealers have also play a role in the heightening the hardship. Follow me on the part two of this piece to explore an eye-witness instance on this devastating phenomenon.

ABDULAZEEZ SALISU LAWAL
A.S.LAWAL WRITES