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In support of fuel subsidy removal

In support of fuel subsidy removal

2 October, 2020

By Princess Mikky Attah


NIGERIA is the largest producer of oil in Africa today, and the 10th largest in oil production worldwide. Paradoxically, Nigeria imports the petroleum it needs to meet domestic demand. Worse, over 70% of Nigeria’s annual budget is used, not for development, but to service fuel subsidy.

Fuel subsidy is the differential between international petroleum prices and the local price, paid by the federal government. However, international oil markets are volatile and the cartel is unable to fix prices for oil that are sustainable over an appreciable time period.

But then, fuel subsidy is a double edged sword because, rather than allow prices to be set by market forces, fuel subsidy causes the differential to be set by an oil cabal; who prefer to keep Nigeria permanently at the bottom of the petroleum products value chain. They, the shadowy oil cabal simply constitute themselves into middlemen and marketers who import the finished product of raw crude back to the country – and are paid hefty subsidies for doing so. It is not accidental that refineries are kept comatose. Nigeria spends trillions annually on fuel subsidy, but will not spend anything near as much on keeping functional refineries.

In 2019, N 1.5 trillion was spent on fuel subsidy. To put that in perspective, in the same year, N365.77 billion went to the health sector, constituting just 4.1 % of a total budget of N8.83 Trillion. Clearly fuel subsidy, at N1.5 trillion out of a national total of N8.83 trillion gulps the lion share.

Worse still is the level of racketeering that takes place in deals in the subsidy regime. For instance, concerning what the media once dubbed “ The $6.8 Billion Fuel Subsidy Scam”; the 2012 report of the House of Representatives Ad- hoc Committee on Fuel Subsidy Regime showed: As at December 2011, N2.587 trillion was paid in fuel subsidy. But only N245 billion was appropriated in the 2011 budget. (Nigeria’s budget in 2011 was N4.6 trillion, ironically it was tagged Budget of Fiscal Consolidation!). Of serious concern though is that a whopping N1 trillion was paid to bogus, non- existent companies. So, Nigeria’s oil cabal received payment for fuel subsidy on fuel that they did not supply!

The Group Managing Director of the NNPC, Malam Mele Kyari was on an African Independent Television AIT programme this year and categorically stated- “There is no fuel subsidy anymore in Nigeria. It is zero subsidy forever. Going forward, there will be no resort to either fuel subsidy or under- recovery of any nature”. And in a recent tweet, President Muhammadu Buhari said,   “There is no provision for fuel subsidy in the revised 2020 budget. We simply cannot sustain petroleum subsidy”.

By these words, the 24-year long subsidy regime in Nigeria has been brought to an end. President Buhari also increased the pump price of fuel from N145 to N151.56 per litre, effective September 2. Expectedly, this effective restructuring of the downstream sector of the oil industry is being met with a lot of resistance by Nigerians. Many people complain of the hardship being experienced in the harsh economy. Indeed the hike in the tariffs of both petrol and electricity at the same time in September appear too much to bear, especially since incomes are rapidly diminishing in the current post- lockdown economy. While oil marketers have condemned a planned total strike and shutdown against fuel price hike; the Nigeria Labour Congress, TUC and 79 other affiliates including PENGASSAN and NURTW are only biding time for their planned protest, if price hikes are not reversed pronto.

However, in the midst of the resistance, an authoritative voice, coming from the opposition PDP at that; is sounding out and calling on Nigerians to show understanding over the recent price hike and removal of fuel subsidy on the product.

The chairman, Senate Committee on Petroleum Upstream, Sen Bassey Albert Akpan is in pole position to comment – he was the  chairman, Senate Committee on Gas in the 8th Senate, and in that capacity, successfully resolved the Escravos Gas- to- Liquid Project debacle which had lasted both the 6th and 7th Senate, without traction. Senator Akpan had headed a joint committee investigating the cash call obligations of the IOCs (International Oil companies). His negotiations resulted in a reworked Joint Venture Cash Call in the nation’s favour such that Nigeria gains $10 million annually in oil revenues from that project today. For bringing about such an upsurge in Nigeria’s revenues, the NNPC gave Sen Akpan a special award in January.

Sen Akpan is now saying that the fuel subsidy regime is unsustainable. He recently came out to say, “ We cannot continue like this as a nation. When the country’s budget is made, so much is taken in the name of subsidy which is benefitting only a privileged few. It is better for the price to be determined by market forces than allow a few persons reap from the federal government subsidy”. The senator submits that the removal of the subsidy will additionally checkmate the high level of corruption associated with the subsidy regime.

It is true that the current situation will bring some pains, with transport fares and cost of goods increasing. On the other hand, when one looks at the global oil industry and the effects of COVID-19 which brought about decreased demand, the downturn in the global price of crude means diminished inflows on crude sales. On the domestic front, even with the increase of pump price of fuel to N 151.56, the world average price for a litre of fuel is actually N388.76.

The truth is that tough choices have to be made to bring about concrete benefit to the nation; but those choices will ultimately be for the greater good of the collective.


  • Twitter @mikky_princess


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