write an expository essay on fuel subsidy removal in nigeria

Nigeria’s fuel subsidy removal was too sudden: why a gradual approach would have been better

Professor of Economics & Business, Allegheny College

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Stephen Onyeiwu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Nigeria removed fuel subsidies entirely in May 2023. This came as a surprise because of the political risks associated with subsidy removal. Previous administrations were reluctant to jettison the subsidies.

The subsidies had been in place since the 1970s , when the government sold petrol to Nigerians at a price below cost – though most consumers weren’t aware of this.

The 1977 Price Control Act made it illegal for some products (including petrol) to be sold above the regulated price. The Olusegun Obasanjo regime introduced this law to cushion the effects of inflation , caused by a worldwide increase in energy prices.

Fuel subsidies have been controversial in Nigeria, and some analysts see them as inequitable. Very few Nigerians own vehicles. Nigeria is among the countries with the least number of vehicles per capita, with 0.06 vehicles per person or 50 vehicles per 1,000 Nigerians.

Read more: Nigeria’s fuel subsidy is gone. It's time to spend the money in ways that benefit the poor

So critics have argued that the subsidies benefited mainly the elites even though they could afford to buy fuel at market prices.

The subsidies were also considered to be a drain on public finances, costing the government US$10 billion in 2022. About 40% of Nigeria’s revenue in 2022 was spent on fuel subsidies.

Fuel subsidies in Nigeria were notorious for their opacity and graft. Billions of dollars were said to have been lost through corrupt practices in the payment of the subsidies.

These are some of the reasons they were removed.

But now questions are being asked about the way it was done. In a public opinion poll conducted last year, 73% of Nigerians said they were dissatisfied with the manner in which the fuel subsidy was removed.

As an economist who has studied the Nigerian economy for over four decades, I can see why the fuel subsidy had to go.

As I argued in a previous article , fuel subsidies were bad for the Nigerian economy. They worsened budget deficits and the country’s debt profile, encouraged corruption, and diverted resources away from critical sectors of the economy. They were also inequitable, transferring the national wealth to elites.

But, as has become clear from the unprecedented inflation in the country partly caused by the removal of fuel subsidies, the abrupt removal of the subsidy was not the best strategy to use.

I believe this action should have been staggered over several months. This would have provided a soft landing, and gradually exposed Nigerians to the full market price of fuel. Doing so in one fell swoop amounts to shock therapy that is very traumatic for an already beleaguered and impoverished citizenry.

Read more: Fuel subsidies in Nigeria: they're bad for the economy, but the lifeblood of politicians

Why removing the subsidy should have been gradual

The Bola Tinubu administration could have chosen from various mechanisms to minimise the negative impact of subsidy removal.

As proposed by the World Bank , a temporary price cap would have ensured that fuel price increases did not inflict too much pain on consumers. This approach would also have enabled the government to significantly reduce, but not eliminate, the fiscal burden of the subsidy.

Another approach is periodic price adjustments: setting the price based on a moving average of previous months’ import costs. These adjustments could have been made together with a price cap. The Philippines is one country that successfully removed fuel subsidies in the 1990s, using the price adjustment mechanism.

Gradually phasing out subsidies would have been a better approach for a number of reasons.

Firstly, Nigerians had become suspicious of government’s intentions, given their economic experiences with the previous administration of Muhammadu Buhari . Those experiences include high inflation and unemployment rates , rising poverty and insecurity.

Tinubu should have re-established government credibility and good intentions first. He could have offered economic succour such as cash transfers and food subsidies for poor Nigerians, wage increases for workers and retirees, scholarships or tuition waivers for indigent students in tertiary institutions, free lunches for primary and secondary students in public schools, and subsidised public transport.

After demonstrating he meant well, he should have gradually rolled out the subsidy removal. Nigerians would have been psychologically prepared for what was coming, including inflation.

The inflationary impact of subsidy removal would have been less severe. Nigerians would have been more tolerant of difficult economic policies. People will accept difficult economic policies if they know their government is humane and pro-people.

Secondly, an incremental approach would have enabled the government to come up with programmes targeted at those most likely to be hurt by subsidy removal. This would have ensured buy-in. The “ palliatives ” introduced by the Tinubu administration and state governments are temporary and have a limited reach .

Gradual subsidy removal would have enabled the government to engage with groups that would be affected by the policy. Groups representing labour, manufacturers, students, women and others could have provided insights into what would be needed to help their members adjust.

This interactive approach would have promoted transparency and credibility in the conduct of government policies.

Many vulnerable Nigerians were already under severe economic pressure. Apart from high unemployment and poverty rates , inflation was biting very hard.

The abrupt removal of fuel subsidies, without first putting in place shock-absorbing measures, will make it more difficult for the government to achieve the policy’s long-term aims: fiscal sustainability; higher levels of investment in productive sectors of the economy; economic growth; and investment in renewable energy.

Read more: Nigeria's transport grant isn't the best way to allocate fuel subsidy savings: here's what is

Minimising the negative impact of subsidy removal

Tinubu should minimise the negative impact of subsidy removal and liberalisation of the foreign exchange market. These two phenomena interact to cause the inflation that the country is facing.

First, savings from ending the subsidy should be used to develop productive capacities in agriculture, labour-intensive manufacturing and services.

Manufacturing activities like agro-processing, textiles, footwear, leather products, arts and crafts should be targeted for development. This would generate high-paying jobs that might help Nigerians to cushion the effects of inflation.

In an economy that’s functioning well, wages always adjust to reflect price increases. In Nigeria, however, too many people are either unemployed or in the informal sector , with limited opportunities to adjust their earnings to reflect inflation.

Funds saved from subsidy removal should be invested in public infrastructure (mass transportation, road construction, electricity generation, water supply).

Funds should also be used to develop people’s capabilities through massive investment in health and education. Part of the savings should be used to support and sustain the student loan programme announced by the Tinubu administration.

Successful radical economic reforms, such as the ones implemented in Rwanda , usually give people an incentive to be more productive, creative and innovative. But policies that are punitive, with marginal or no benefits, are unlikely to succeed.

It remains to be seen whether Tinubu’s economic policies will spur sustained and inclusive economic growth, as well as alleviate poverty.

• Minimum wage
• Fossil fuel subsidies
• fuel prices
• Bola Tinubu
• Nigeria fuel subsidy crisis

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Fuel Subsidy Removal In Nigeria: Impact, Reasons & Future Prospects

Revised by deborah iroegbu.

Fuel subsidy is the government’s intervention or effort in paying the difference between the pump price at petrol stations and the actual cost of fuel importation.

It means selling petrol to the end user lower than the cost of importing and giving direct financial support to oil marketers by the government. This is because, with subsidy, the government takes upon itself the responsibility of paying a fraction of the cost of PMS- Premium Motor Spirit- also known as Petrol, thereby easing the burden of paying the full cost by its citizens, especially lower-income earners.

For instance, if the global market cost of PMS is 500 naira, the government comes to an agreement with petrol marketers to pay 300 naira while its citizens pay what is left, which is 200 naira. This was to relieve the burden of buying fuel at its actual cost on its citizens to benefit the lower-income groups. Subsidising meant that the government decided how much oil marketers sold products to the people.

Fuel subsidy has been on since the 1970s, and ever since then the fraction paid by the government has been on the rise and this increase has led to the issue of subsidy removal.

What is subsidy removal?

Between 2006-2018, Nigeria spent over 10 trillion naira on petroleum subsidies, that is about 21.7 billion dollars, and since the 70s, different administrations have tried to remove subsidies, from former President Ibrahim Babaginda in 1986 to former President Goodluck Ebele Jonathan in 2012, but each administration encountered challenges, like the protests and backlash that the Jonathan administration met concerning the issue.

Even at some point during former President Buhari’s tenure, the issue was raised and withdrawn until towards the end of his administration when it was disclosed that provision for subsidy was made only for the first half of the year 2023 and as such fuel subsidy will end with the Buhari administration, and to further confirm this, President Bola Tinubu during his inaugural speech announced that fuel subsidy removal will commence on the 1st of July 2023.

So, what is subsidy removal? It is a situation whereby the aid on the cost of fuel given by the government is withdrawn and the people are to pay for PMS according to the actual market price, that is no more fraction payment by the people.

So, if the cost of fuel in the global market is 600 naira and marketers sell at 650 naira, then the citizens will have to buy 650 naira.

Reasons for Subsidy Removal

With trillions of naira and billions of dollars spent on fuel subsidies, Nigeria’s debt as of 31 March 2022 was about 41.60 trillion naira, little wonder why subsidy removal became a hot topic among the nation’s leaders.

Removing subsidies would give opportunities for other sectors of the economy to become a priority. It will also allow private sector participation in the importation of petroleum products as provided in the Petroleum Industrial Act (2021) which was signed into law by former President Muhammadu Buhari, which allows for total deregulation of the petroleum downstream sector (the refining, processing, purifying, marketing and distribution of products derived from crude oil and natural gas) to drive investment and growth.

Benefits of Subsidy Removal

Some key points of the benefits of subsidy removal include;

• The ready availability of PMS at all times for Nigerians as there will be no diversions by marketers because the country will be saturated with petrol, so that means bye-bye to fuel hoarding by Emeka, the fuel attendant, long queues, and black-market sellers.
• With private sector participation in the importation of petroleum products, the market will be free and Nigerians empowered.
• It will bring about competition in the industry and market forces will drive down the price in the long run.
• The funds spent on subsidies will be channelled into other sectors that lack development, like infrastructure, education, health care, and others.

Fuel Subsidy and PMS Price Hike

Following the announcement by His Excellency, President Bola Ahmed Tinubu in his inaugural speech on 29th May 2023 that fuel subsidy has been removed, Nigerians went into panic buying which then led to a hike in the price for fuel over-night from 350 naira to 511 naira in some locations.

Although the President mentioned that the subsidy removal was to take effect from the 1st of July 2023, the Chief Executive Officer of Nigerian National Petroleum Company Limited- NNPC Ltd, Mr Mele Kolo Kyari, also confirmed that there is enough fuel to serve Nigerians until 30th, June 2023 and urged Nigerians to not panic buy, but Nigerians being unsure of the days ahead went into a fuel-buying frenzy causing long queues and a hike in transportation fares as well.

Now that subsidy has been removed, fuel prices will be aftermarket realities, meaning that fuel prices will be dependent on the cost of importation, and transportation to fuel stations, which will adversely influence fuel prices and the cost of living for the people. In the coming months, fuel prices will fluctuate until the market stabilises.

As of now NNPC Ltd is the only major importer of petroleum products but with the subsidy removal and provision for private independent marketers to also import petroleum products, fuel prices are likely to see a decline as the market normalises.

While the country waits for market stability, the increase in fuel prices automatically affects the increase in transportation, foodstuffs, and eventually the cost of living.

Truly, the nation is about to embark on a sensitive journey in this new dispensation. Subsidy removal spells growth and progress for the country, but the road leading to this destination will be quite challenging.

Maybe if the government had put in place provisions to cushion and prepare Nigerians for the journey ahead, rather than ‘putting the cart before the horse’, the panic state the citizens have been subjected to for the past 72 hours would have been alleviated or avoided totally.

I hope that with the provisions put in place by the Petroleum Industrial Act (2021) signed into law by former President Muhammed Buhari and the Dangote Refinery, which will kick off production in July, the country will reach its economic boom and social stability sooner rather than later

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Removal of Fuel Subsidies in Nigeria: An Economic Necessity and a Political Dilemma

Subscribe to africa in focus, nelipher moyo and nm nelipher moyo research analyst vera songwe vera songwe nonresident senior fellow - global economy and development , africa growth initiative.

January 10, 2012

Lagos, the second most populated city in Africa, is an uncharacteristic ghost town today. The government’s decision to eliminate Nigeria’s costly but highly popular fuel subsidy program has sparked mass protests and unrest across the country as fuel costs have increased officially from $0.40/liter to $0.86/liter. On Monday morning , labor unions began a nationwide general strike that has brought Nigeria to a standstill.

Despite the unrest, the decision to abolish Nigeria’s fuel subsidy is the right one. In 2011 alone, Nigeria’s fuel subsidy cost the country an estimated $8 billion and the price tag for 2012 was expected to be even greater. This does not even take into account the country’s losses due to market distortions as a result of the subsidy. While politically costly in the short run, if Nigeria’s government can implement transparent and well-structured reforms, the funds from the fuel subsidy program could be put to far greater use.

With an estimated 37.2 billion barrels of proven oil reserves, Nigeria is one of the world’s largest oil producers. However, the country’s mineral riches have not resulted in a significant improvement in the quality of life for the majority of Nigeria’s citizens, 54 percent of whom live below the national poverty line. In 2010, Nigeria earned $59 billion from oil exports . Therefore, Nigeria does not lack the resources to reach its development goals, rather its resources have been utilized inefficiently.

In the wake of the global financial crisis and increasing sovereign debt risk, financing for development is drying up and developing countries must now look inward to finance their growth and development needs. Crisis times require bold reforms and President Jonathan of Nigeria has the ability to take on one of the most difficult problems in his country. But in order to succeed, he will also have to take on another challenge – transparency in the use of the $8 billion fuel subsidy funds. The government must utilize these resources more efficiently to create social welfare and infrastructure improvement programs that will not only improve the quality of life for Nigeria’s poorest but also put the country on track to meet its development goals.

Cost of the Fuel Subsidy

The cost of the fuel subsidy has continued to grow exponentially. This is partly due to the rising cost of fuel—which meant that the government had to spend even more to keep domestic prices low— and also due to Nigeria’s increasing population— which resulted in increased fuel consumption; together these pressures made the cost of the fuel subsidy unsustainable. The price of crude oil increased from 30.4 dollars per barrel in 2000 to 94.9 in 2010 over the same period Nigeria’s population increased from about 123 million to 158 million. By 2011, the fuel subsidy accounted for 30 percent of the Nigerian government’s expenditure and it was about 4 percent of GDP and 118 percent of the capital budget.

Nigeria’s fuel subsidy continues to crowd out other development spending. By comparison,, Nigeria’s total allocation for education is about $2.2 billion and it is not much higher for health care. Infant mortality in Nigeria remains unacceptably high at 90.4 per 1,000 live births. In 2004, it was estimated that only 15 percent of the country’s roads were paved. The $8 billion from the fuel subsidy could help to address some of these issues.

In addition, keeping the domestic price of oil artificially low with the fuel subsidy has discouraged additional investment in Nigeria’s oil sector. This is especially problematic given that the oil sector is the lifeblood of the Nigerian economy. Since 2000, Nigeria has issued at least 20 refinery licenses to private companies. However, not one refinery has been built because investors could not recoup their investment under the artificially low price structure.

Who Benefits the Most?

In debating the merits of Nigeria’s fuel subsidy it is important to understand who benefits the most from the program. Contrary to popular belief, it is the rich not the poor who disproportionally benefit from Nigeria’s fuel subsidy. With the government subsidizing the market to keep domestic fuel prices artificially low, it is those who consume the most that have a greater benefit from the subsidy. Nigeria’s poor rely primarily on public transportation as such their per capita fuel consumption is significantly less than the country’s rich, who generally use private vehicles. Neighboring countries also benefit significantly from Nigeria’s fuel subsidy through smuggling.

Sustaining Reforms Amidst Unrest

One legitimate criticism against the Nigerian government is that it has done a poor job in planning for the subsidy removal and in communicating the huge costs of the fuel subsidy and the benefits of its removal to the population. In a country where there is already a lack of trust between the people and government, communications is critical. Otherwise the protesters will continue to believe that this is just another ploy by Nigeria’s elite to further capture the country’s resources. The real challenge the government faces is winning the trust of the people. Working Nigerians are hurting and their livelihoods are in danger with the doubling of petrol prices. They want to know that the government has a credible plan and the protests represent a call for the government to quickly implement post-subsidy programs. Some form of social protection must be launched immediately to protect the most vulnerable. This could include measures to reduce the cost of public transportation in the near term.

The Nigerian government must implement a transparent system for redirecting and monitoring the use of funds from the fuel subsidy program so that its citizens can review and scrutinize the expenditure. The government has announced its intention to redirect the funds from the subsidy into infrastructure, support for small businesses and safety net programs. This is a step in the right direction, but the success of these programs rests on having proper oversight and participation of civil society. The government should assemble a committee of key civil society organizations to oversee the investment of these funds. Unlike the fuel subsidy itself, these programs should be targeted toward helping the poor including programs to reduce maternal and infant mortality and improve road quality and access. Most importantly, the programs must be tied to Nigeria’s overall development goals. The government and the proposed civil society oversight committee must prioritize sustainable investments that will have a long-term development impact. Pork barrel type investments spread across the country to appease the people will not serve President Jonathan and his government well in the long run.

It is too early to tell whether the Nigerian government will succeed in these efforts but after 20 years of dodging the issue and trillions of Naira spent, the removal of the fuel subsidy should be supported. If implemented correctly, the subsidy funds could lead to major development gains. Moreover, the removal of the fuel subsidy – if successfully implemented – creates the space for Nigeria to finally develop refinery capacity and consequently increase its potential revenue from the oil sector and create jobs. Civil society organizations should take this opportunity to fully engage in the debate on how best to redirect the funding from the subsidy program. In turn, the Nigerian government must communicate its plans and actions transparently to the people.

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Reference List

• ‘Subsidy’ (2012) Wikipedia. Available at: http://en.wikipedia.org/wiki/Subsidy (Accessed: 6 July 2012)
• Mbendi (2012) ‘Oil and Gas in Nigeria – Overview’ 7 July [Online]. Available at: http://www.mbendi.com/indy/oilg/af/ng/p0005.htm (Accessed: 7 July 2012).
• Chiejina, A. (2012) ‘Fuel subsidy removal: Repositioning Nigeria’s economy?’, BusinessDay 9 January [Online]. Available at: http://www.businessdayonline.com/NG/index.php/analysis/features/31698-fuel-subsidy-removal-repositioning-nigerias-economy (Accessed: 7 July 2012).
• ‘Occupy Nigeria’ (2012) Wikipedia. Available at: http://en.wikipedia.org/wiki/Occupy_Nigeria

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Assessing the Implication of Fuel Subsidy Removal in Nigeria: Economic, Social and Political Considerations

June 21, 2023

Fuel subsidies in Nigeria were initially introduced in the 1970s as a means to alleviate the impact of rising global oil prices on the Nigerian population. At the time, Nigeria was experiencing a significant increase in oil revenues due to the oil boom, and the government sought to use a portion of these revenues to subsidise petroleum products, particularly gasoline (also known as Premium Motor Spirit or PMS).

“What is fuel subsidy all about?” This question has been widely discussed in recent days, revealing a lack of understanding among the general public. To provide a straightforward explanation, subsidy refers to the indirect financial support provided by a government, organisation, institution, or individual to specific individuals, organisations, or entities. A relatable example was shared on social media to illustrate this concept using a fantasy-like scenario.

“In a faraway kingdom, there was a flourishing realm with a thriving population. One day, at the court, the king contemplated how to improve the lives of the citizens. Consequently, he summoned all the wood suppliers in the kingdom and proposed that for every kilogram of wood sold to the kingdom’s citizens, he would subsidize 50% of the cost. For instance, if a kilogram of wood is sold at N1/kg, the king would pay the wood supplier 50 kobo, while the citizen would only have to pay the remaining 50 kobo to obtain the N1/kg wood.” This simplified example serves to illustrate the concept of a subsidy.

The Nigerian government justified fuel subsidies as a means to ensure the affordability of petroleum products for its citizens, especially those in lower-income brackets. Subsidies were also seen as a mechanism to support economic growth, maintain social stability, and stimulate development by reducing the cost of transportation and goods.

Over time, fuel subsidies became a substantial financial burden on the Nigerian government. This was primarily due to a combination of factors, including increasing domestic fuel consumption, inefficient refineries, importation of refined products, smuggling, and corruption. As a result, the cost of subsidising petroleum products rose significantly.

Nigeria Extractive Industries Transparency Initiative’s (NEITI’s) latest policy brief, titled ‘The cost of fuel subsidy: A case for policy review,’ revealed that Nigeria expended over N13tn (US$74bn) on fuel subsidies between 2005 and 2021.

“The figure in relative terms is equivalent to Nigeria’s entire budget for health, education, agriculture, and defence in the last five years, and almost the capital expenditure for 10 years between 2011‑2020.

Nigeria’s fuel subsidy regime was particularly vulnerable to fluctuations in global oil prices. When international oil prices surged, the cost of subsidising fuel imports increased, further exacerbating the subsidy burden on the government. Conversely, when oil prices declined, the government faced challenges in meeting the rising demand for subsidies due to reduced revenues.

The fuel subsidy regime in Nigeria became marred by corruption and rent-seeking practices. The system provided an avenue for powerful individuals and groups to exploit loopholes, divert funds, and engage in fraudulent activities. This led to the misallocation of resources and perpetuated a culture of corruption within the petroleum sector.

Over the years, there have been various attempts to reform or remove fuel subsidies in Nigeria. These reform efforts aimed to address the financial strain on the government, reduce corruption, promote market efficiency, and redirect funds to more productive sectors.

In 2012, the Nigerian government, led by former President Goodluck Jonathan, made a bold move to remove the subsidy on Premium Motor Spirit (PMS). The subsidy was costing the government over N 1 trillion annually, and its removal aimed to redirect funds toward economic stability and infrastructure development. However, this decision ignited widespread protests, strikes, and public unrest. Eventually, the government yielded to public pressure and partially restored the subsidy.

In 2015, faced with declining oil prices and limited financial reserves, President Muhammadu Buhari’s administration announced a gradual phasing out of fuel subsidies over the course of 2016. Extensive consultations were held with stakeholders, including political leaders, oil sector investors, and civil society organisations. However, before a consensus was reached, a new regime was introduced allowing independent importers and marketers to access foreign currency for fuel imports, capped at N145.6 per litre.

The journey of fuel subsidies in Nigeria highlights the delicate balance between economic reforms and social impact. Attempts at removal have been met with public backlash due to concerns about increased living costs. The compromises made by successive administrations reflect the challenges in finding sustainable solutions that address fiscal pressures and social welfare simultaneously.

President Bola Ahmed Tinubu, GCFR, during his Inauguration Speech on May 29th, 2023, made a significant announcement that “the Fuel Subsidy is gone!”, declaring the end of the fuel subsidy on Premium Motor Spirit (PMS) in Nigeria. This momentous decision sent shockwaves across the nation and reverberated globally. The immediate consequence of this announcement was the swift adjustment of PMS prices throughout the country.

In response to the President’s pronouncement, the Nigerian National Petroleum Company (NNPC) Limited, on May 31st, 2023, implemented changes to the retail prices of PMS. These adjustments resulted in varying prices nationwide, with Lagos State experiencing PMS prices of around N488 per litre, while in Maiduguri, Borno State, the prices reached approximately N555 per litre.

The removal of the fuel subsidy represents a significant shift in Nigeria’s energy policy and has wide-ranging implications for the economy, society, and the daily lives of its citizens. While the exact motivations and considerations behind this decision are multifaceted, it is clear that the government seeks to address the long-standing challenges associated with fuel subsidies, including financial strain, corruption, and market inefficiencies.

By removing the fuel subsidy, the government aims to redirect the substantial financial resources that were previously allocated to subsidising petroleum products toward critical sectors such as infrastructure development, education, healthcare, and social welfare programs. This strategic reallocation of funds is expected to foster economic growth, enhance service delivery, and improve the overall well-being of the Nigerian people.

However, the immediate consequence of the subsidy removal has been the upward adjustment of PMS prices, which has caused concerns among the populace. The increase in fuel prices has implications for transportation costs, the cost of goods and services, and the overall cost of living. These price adjustments may present challenges, particularly for lower-income individuals and vulnerable segments of the society.

It is essential for the government to address these concerns by implementing measures to mitigate the potential adverse effects of increased fuel prices. This may involve the development of targeted social safety nets, the promotion of substitute energy sources, and the enhancement of public transportation systems. Additionally, effective communication and transparency regarding the government’s plans and initiatives will be crucial in building trust and understanding among the public.

The subsequent part of this article aims at delving into the economic, social, as well as political implications of the removal of fuel subsidy in Nigeria.

ECONOMIC, SOCIAL, AND POLITICAL IMPLICATIONS OF FUEL SUBSIDY REMOVAL Every government policy or decision comes with resulting effects. In this article, we examine the economic, social, and political implications of fuel subsidy removal.

Economic Implications

• Fiscal Sustainability Fuel subsidies have imposed a substantial financial burden on the Nigerian government, diverting resources that could be allocated to other critical sectors such as healthcare, education, and infrastructure. The removal of the subsidy would allow the government to redirect these funds toward essential services and development projects, potentially improving the overall economic outlook.
• Budgetary Control Fuel subsidies often lead to budgetary uncertainties, as fluctuations in global oil prices impact subsidy costs. By eliminating the subsidy, the Nigerian government will have better control over its budget and reduce fiscal deficits, promoting economic stability and investor confidence.
• Encouraging Market Efficiency Fuel subsidies distort market forces and discourage private sector participation in the petroleum industry. Removing subsidies can foster competition, encourage investment, and promote efficiency in the downstream oil sector, leading to improved productivity and long-term economic growth.
• GDP and Economic Growth The removal of the subsidy is expected to provide the government with more funds to invest in other sectors of the economy, potentially leading to economic growth. However, it is important to note that economic growth is not solely dependent on fund availability; the quality of expenditure and corresponding policies play a crucial role. Nonetheless, the removal of fuel subsidy is widely seen as a step in the right direction and could provide the government with at least an additional N4 trillion to allocate to other sectors of the economy.
• Businesses and Employment In the short term, the cost of running businesses is expected to increase as fuel is a major source of energy for most businesses, especially the small and medium enterprises (SMEs). Higher fuel prices will likely impact business expenses. While this may not have an immediate significant effect on employment rates, it depends on the government’s implementation of proactive solutions to justify the subsidy removal.
• Investment Possibilities The removal of fuel subsidy and the determination of prices based on market forces (demand and supply factors) are expected to attract more investors to the oil and gas industry. This, in turn, can lead to the establishment of more modular and standard refineries in the future. Businesses will invest more in developing efficient means of providing fuel, as well as other alternative sources of power, thereby increasing competitiveness within the industry.
• Inflation Given the strong positive correlation between pump fuel prices and the cost of goods and services in Nigeria, an increase in fuel prices is likely to lead to higher prices for goods and services. Inflation may rise initially as a logical economic reaction to fuel price subsidy removal.
• Social Welfare While the removal of fuel subsidy is a welcome development, it significantly affects the lower economic class citizens, who form a major part of the country’s economic strata. The current minimum wage of N30,000 can only purchase 60 litres of fuel at an average pump price of N500 per litre. This amount is insufficient for a country that heavily relies on fuel for electricity generation. The increased fuel pump price has diminished the economic power of citizens, particularly those in the lower economic class. If the government fails to implement an appropriate response, the middle economic class citizens may also be pushed into the lower economic class. This shift would result in a drop in the country’s GDP and economic stagnation. Unfortunately, the government has not introduced any policies or schemes to aid the economic recovery of the lower economic class citizens.

These economic implications are interconnected and require careful consideration. While fuel subsidy removal is not the sole factor influencing these outcomes, it plays a significant role. The government’s response to these observations is crucial to mitigating negative consequences and ensuring sustainable growth and development.

Social Implications

• Income Distribution Fuel subsidies disproportionately benefit higher-income groups who consume more fuel. The removal of the subsidy has immediately resulted in an increase in fuel prices of at least 150% (though expected to progressively reduce with market activities over time) which given the resulting increase in the cost of living has surely impacted the lower-income households disproportionately. To mitigate this, the government must consider implementing targeted social safety nets to protect vulnerable populations from the immediate effects of subsidy the removal.
• Social Safety Nets Following the fuel subsidy removal, the average fuel price has increased by 150%, resulting in a rise in prices across the country, including basic food items and transportation. While the removal of fuel subsidy is seen as a step in the right direction, the government has not implemented any safety net programs to alleviate the impact of this policy on citizens. In 2012, former President, Goodluck Jonathan proposed a robust mass transit infrastructure program alongside the subsidy removal to help mitigate transportation costs during this period. The introduction of such a cushioning program would help alleviate the short-term effects of this policy.
• Public Infrastructure and Services The increase in fuel prices has put additional strain on public infrastructure, such as the BRT system in Lagos. Due to the higher fuel costs, some individuals have opted for public transportation, leading to increased demand, and longer waiting times. This has negatively affected citizens’ productivity and overall well-being.
• Social Mobility Nigeria has faced economic challenges in recent years, with a growing concern about the disappearing middle class and increasing numbers of people moving into the lower economic class. The removal of fuel subsidy is expected to further impact the economic power of the majority of the population, potentially resulting in a higher percentage of downward social mobility compared to upward social mobility in the short term. The government should introduce policies that address the negative impact of subsidy removal to mitigate these effects.
• Economic Opportunities The removal of fuel subsidy has notably increased the cost of doing business in the country, leading to higher transportation costs and prices of goods and services. However, the economy has not provided sufficient incentives for businesses to increase their revenues and income in tandem with these rising costs. Aspiring entrepreneurs looking to start new businesses may face challenges due to the current exponential growth in costs. Thus, the impact of this policy on economic opportunities is currently negative.

The social implications of fuel subsidy removal are currently negative, as both the populace and businesses require time to fully adapt to the new realities whilst waiting in anticipation for the economy to stabilise.

Political Implications

• Governance and Accountability Fuel subsidy has long been associated with a lack of transparency in its payment and the actual quantity of fuel being paid for. With the removal, there is an opportunity to improve transparency in accurately tracking the consumption of fuel. The absence of subsidies provides less incentive for data falsification, leading to increased accuracy. Additionally, this removal can foster greater transparency in the trading of fuel by the NNPC. These improvements in governance and accountability are positive outcomes of the fuel subsidy removal.
• Public Perception and Trust The removal of fuel subsidy enhances transparency in fuel consumption and the operations of the NNPC. Despite the difficulties it has brought, this policy has gained widespread acceptance among the populace. The increased transparency and the perception of addressing economic obstacles and corruption contribute to the positive reception of the policy.
• Political Legacy The current administration’s decision to remove the fuel subsidy reflects its commitment to addressing barriers to economic development and tackling corruption. This move has generated goodwill among the population, making them more receptive to the future policies of this administration. The removal can leave a positive political legacy by signaling a bold and proactive approach to economic challenges.
• Political Stability The instantaneous response of the current government in taking a stance on fuel subsidy removal has sent a clear signal across the country that they have a focused agenda and the determination to implement it. This decisive action promotes political stability and provides room for the current administration to effectively execute its plans.

Addressing issues of governance, transparency, public perception, and stability, the removal of fuel subsidy can have several positive political implications for the country’s development.

CONCLUSION The removal of fuel subsidy, although anticipated and necessary, has brought about both positive and negative implications across various aspects of the country. It is a decision that affects the economy, society, and politics. While the burden and issues associated with the fuel subsidy were well-known to the public, government, and international bodies, the removal was not without its challenges.

Despite the challenges, the removal was a welcomed decision. However, it is crucial for the government to implement supporting policies that can mitigate the adverse effects of the subsidy removal. These policies should aim to cushion the impact and effectively utilise the additional funds generated from the subsidy removal to foster the development and growth of the economy and the country as a whole.

In summary, the fuel subsidy removal was a necessary step, and it is now essential for the government to enact measures that address the implications and ensure a positive outcome for the nation’s progress.

Fuel Subsidy Removal: Prospects and Challenges on the Nigerian Economy (Evidence from Akure, Ondo State Metropolis)

73 Pages Posted: 17 Oct 2016

solomon ojingiri

South America University

Date Written: October 14, 2016

For some years now, one of the most taunting and complex sociology-economic policy issues in Nigeria remains the issue of Fuel subsidy removal. The decision by the government to out rightly remove the subsidy on fuel ignited series of arguments and protests nation-wide. Despite the global reduction in the price of oil, Nigeria experiences high price of oil. This study examines the prospects and the challenges of fuel subsidy removal on the Nigerian economy. The methodology employed is the Anova statistics which was applied to test the hypotheses stated in the study at 0.05 significant level. The results obtained showed that fuel subsidy removal affects the cost of living, reduces the consumption pattern, savings and investment level of the people and that it is a plague to the Nigerian economy and her people. As a result, it is recommended in this study that the widespread of corruption embedded in the system should be eradicated and be dealt with it, appropriately through transparent fiscal operation. To diversify the economy by embracing agricultural production of our food stables instead of importing them likewise, Nigeria to build more refineries and the major refineries should work in full capacity. These programme are growth prospects that will brighten the Nigerian economy and her people in the nearest future.

Keywords: fuel subsidy

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Solomon Ojingiri (Contact Author)

South america university ( email ).

Delaware United States

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The socio-economics of the 2023 fuel subsidy removal in Nigeria

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How (and why) Nigeria should remove its fuel subsidy

Nigeria spends a quarter of its budget on a regressive fuel subsidy. Removing it and distributing the savings can help the poorest.

When a previous government tried to remove the fuel subsidy in 2012, it prompted large protests across Nigeria. Credit: Kolawole Oreoluwa.

Nigerians are being hit from all sides by factors that are making their lives more difficult. These include the rising cost of living , which is reflected in double-digit inflation , stagnant wages , non-payment or the late payment of salaries , a cash crunch , and fuel scarcity . A defining moment for Nigerians could come after the swearing-in of Nigeria’s new president on 29 May. It is expected that President-elect Bola Ahmed Tinubu will jettison Nigeria’s fuel subsidy, which is estimated to cost the treasury about $10 billion annually. This is about 24% of Nigeria’s 2022 budget.

Fuel subsidies have been in place in Nigeria since the 1970s . They began with the government routinely selling petrol at below cost. But most Nigerians were unaware that this was being done. Fuel subsidies became institutionalised in 1977, following the promulgation of the Price Control Act , which made it illegal for some products (including petrol) to be sold above the regulated price. This law was introduced by the General Olusegun Obasanjo regime to cushion the effects of the surging inflation across the world, caused by increases in energy prices.

In recent years, the World Bank has been urging Nigeria to remove the fuel subsidy. It argues that failure to do so would exacerbate the country’s fiscal challenges and worsen its debt profile. The outgoing administration agreed and said the subsidy would be removed in June 2023 but later suspended this plan in late-April .

There are concerns the removal of the subsidy would impose further hardships on Nigerians by raising fuel and transportation costs. This would erode their real purchasing power and increase the number of the working poor. As an economist and Nigerian, I have followed debates around subsidies particularly closely. I have found that fuel subsidies are not only unsustainable and inequitable; they also lack a sound economic rationale. Political considerations appear to take precedence over economic logic in this debate. Previous administrations have baulked at getting rid of the fuel subsidy.

In my view, removing it could benefit workers and poor Nigerians – if carefully managed and implemented. The fuel subsidy should be discontinued and a significant portion of the savings distributed to low-income Nigerians. Resentment toward subsidy removal can be avoided if better alternatives are explained.

Three reasons subsidies are bad

Over-consumption.

Setting fuel prices below market prices encourages over-consumption, with no significant linkage effects on other sectors of the economy. Linkages are usually created when the consumption of a good or service results in the emergence of new economic activities. Consuming fuel beyond a socially optimal quantity does not have that effect. Instead, it diverts resources away from more productive sectors of the economy. The global trend is to discourage fuel consumption by making it more expensive through higher sales taxes. And by discouraging investment in fossil fuel projects.

Negative outcomes

Subsidising fuel exacerbates pollution, global warming , and road accidents – what economists call negative externalities . This is when one person’s actions negatively affect other people that are not part of the actions.

Subsidies reinforce inequality. The artificial reduction in the market price of fuel benefits upper income households the most because they are the ones who use the most fuel. They own the most cars in Nigeria, especially the ones that guzzle petrol. Nigeria is among the countries with the least number of vehicles per capita, with 0.05 vehicles per person or 50 vehicles per 1000 Nigerians. With an abysmally low minimum wage of N30,000 ($65) per month and non-availability of car loans, most Nigerian workers cannot afford a car.

Raise productive capacity

The savings of removing the subsidy should be used to build the productive capacities of Nigerians. These are described by the UN Conference on Trade and Development as: “the productive resources, entrepreneurial capabilities and production linkages that together determine a country’s ability to produce goods and services that will help it grow and develop.”

Nigeria urgently needs to increase its productive capacities. It could achieve this through:

• cash subsidies for restarting moribund but viable industrial enterprises
• the provision of subsidised agricultural inputs for farmers
• loans to students in tertiary institutions
• scholarships for those studying subjects that support industrial development
• investment in technology
• massive investment in infrastructure, with priority for projects that use direct labour and
• a special loan programme for entrepreneurs in the informal sector.

Investments such as these would ensure Nigeria gets the biggest bang for its buck, rather than the current wasteful spending on the corruption-infested fuel subsidies regime. Nigeria’s fuel subsidies have encouraged arbitrage, whereby unscrupulous business people buy fuel at the subsidised price and resell it at a higher price across the country’s borders. This practice is partly responsible for the perennial fuel scarcity in Nigeria.

Cash transfers

Savings from scrapping the fuel subsidy could be used to augment Nigeria’s Conditional Cash Transfers programme. This was introduced in 2016 as part of the Buhari administration’s Social Investment Program (SIP). Eligible individuals are entitled to a monthly cash payment of N5,000 (about $11). But only 784,176 individuals received the payment in 2020.

Fuel subsidy removal will enable the government to significantly increase this number. Individuals with an income of N30,000 ($65) per month or less should qualify for a new cash transfer program. It can be designed to last for six months.

To cushion the effects of subsidy removal, the Nigerian government has also obtained an $800 million relief package from the World Bank. The money, which should be added to the pool of funds available for the conditional cash transfer program, is expected to be distributed to 10 million households as cash.

Apart from being an assurance that the government does care for them, a cash transfer would also help stimulate the economy by spurring the demand for goods and services, which has been stagnant. The inflationary impact of cash transfers from fuel subsidy savings will be minimal, since new money is not created in the economy. In any case, inflation in Nigeria is mainly due to supply constraints, rather than demand.

Safety nets

There are no institutionalised safety net programmes for most Nigerians, which is why they regard the fuel subsidy as one way in which the government supports poor people. The harsh reality is that fuel subsidies benefit mainly upper class households, who consume most of the fuel in Nigeria. To overcome the perception – and to provide genuine support for those struggling to survive – the government should use the savings to subsidise mass transport systems, agricultural inputs, education, affordable healthcare, and low-income housing.

A lasting legacy

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ANALYSIS: Fuel Subsidy Removal And Effect On Nigeria’s Economy

The provision of fuel subsidies by governments has been a major issue in many countries due to its significant economic and political implications. The intention of such subsidies is to alleviate the burden of high fuel prices on citizens and businesses. However, the provision of subsidies involves the government’s decision to provide financial assistance to the oil industry in order to keep fuel prices lower for consumers.

Fuel subsidies have long been a contentious issue in Nigeria, as they are costly for the government and have been plagued by corruption and inefficiency. In recent years, there have been calls for the government to reform or even eliminate fuel subsidies, as they consume a significant portion of the country’s budget and are seen as a drain on resources that could be better used to fund critical infrastructure and social programs.

The first major subsidy removal in Nigeria occurred on January 1, 2012, by the federal government. The decision was controversial and led to widespread protests across the country. The government argued that the removal of subsidies was necessary to reduce government spending and encourage investment in local refineries, but many Nigerians felt that the move would lead to increased hardship for ordinary citizens, who rely heavily on fuel for transportation and electricity generation.

In Nigeria’s 2023 budget , the federal government (FG) allocated ₦3.6 trillion to pay for fuel subsidies for the first half of 2023. This figure shows a huge gap compared to the ₦443 billion in subsidy payments allocated from January to June 2022. This amount sparked a lot of discussions on whether it is wise to spend such a huge amount, considering it would increase the government’s budget deficit. 

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Buhari’s Promise To Remove Fuel Subsidy

There have been controversies surrounding the Nigerian government’s commitment to removing fuel subsidies, as promised. Despite the government’s recognition of the need to remove fuel subsidies due to their high cost and corruption, there has been a lack of concrete action in implementing the necessary reforms.

During the campaign of President Muhammadu Buhari, he made promises to end fuel subsidies but has yet to do so. He promised to end Nigeria’s fuel curse, but seven years into his eight-year term, fuel scarcity continues, especially in Abuja and Lagos, indicating that little has been done to solve the fuel problem. Refineries in Nigeria have not worked for seven years, despite spending billions of naira annually on their servicing and maintenance. 

Instead, his government has implemented a bungled subsidy policy that has led to shortages and price increases. Many Nigerians have criticized Buhari’s handling of the issue and accused him of failing to fulfill his promises. According to this report , the Minister of Finance, Budget, and National Planning, Mrs. Zainab Ahmed, suggested that it would be safer for the current administration (President Muhammadu Buhari) to start gradually removing the fuel subsidy at the beginning of the second quarter instead of waiting to remove it all at once. 

The minister mentioned that the Nigerian government intends to allocate N3.35 trillion towards petrol subsidies between January and June 2023, thereby increasing the government’s budget deficit, which will have to be financed through borrowing, adding more to the country’s already high public debt of N44.06 trillion as of September 2022.

Tinubu To Decide Subsidy Removal

The All Progressives Congress Presidential Campaign Council has said the incoming administration of Bola Tinubu will decide the date the fuel subsidy will be removed.

Just like Buhari, the newly elected president, Bola Tinubu , has been firm on his plans to remove fuel subsidies, as this formed a major part of his campaign, although this is not the first time Tinubu will be calling for the removal of fuel subsidies. In 2015 , he urged the federal government to immediately remove fuel subsidies.  

Tinubu, who tagged the fuel subsidy as anti-poor before his victory at the poll, assured Nigerians that the fuel subsidy would be removed.

Neighboring Countries Remove First Fuel Subsidy

Neighboring countries like Ghana recently removed fuel subsidies and deregulated their markets. In a report , Ghana’s National Petroleum Authority’s (NPA) Abdul Hamid stated that industries were shutting down because the government was finding it hard to find the money to provide subsidies. According to him, due to the subsidy removal, the industry is being powered by investments in the private sector, and there are no complaints about supply.

Ending Subsidy But No Refineries

Nigeria relies heavily on imported fuel, which is then subsidized by the government to keep prices low for consumers. This system is inefficient and costly, as it depends on international market prices and can lead to corruption and waste. However, simply ending subsidies without addressing the underlying issues of refineries would not be a sustainable solution.

By developing refineries within the country, Nigeria could reduce its reliance on imported fuel and create new jobs in the process. However, this system would require significant investment in infrastructure and regulatory reforms to attract private investment. Also, the development of refineries could take years, making it a long-term solution rather than an immediate fix.

Fuel Subsidy Has Enormous Benefits

Dr. Muda Yussuf, Chief Executive Officer at the Center for the Promotion of Private Enterprise (CPPE), gave instances where fuel subsidy removal has enormous potential benefits, which he refers to one as the revenue effect. According to him, the removal would unlock about N7 trillion into the federation account, reduce the fiscal deficit,  and ultimately ease the burden of mounting debt.

He referred to the second as the investment effect. “Currently, it is extremely difficult to attract private investment into our petroleum downstream sector because of the unsustainable subsidy regime and the stifling regulatory environment. The subsidy removal will eliminate the distortions and stimulate investment.

“We would see more private investments in petroleum refineries, petrochemicals, and fertilizer plants. Post subsidy regime would also unlock investments in pipelines,  storage facilities,  transportation, and retail outlets. We would see the export of refined petroleum products, petrochemicals, and fertilizers as private capital comes into the space. Quality jobs will be created.”

He continued, with the third being the foreign exchange effect. “This would result from the import substitution as petroleum products importation continues to decline. This would conserve foreign exchange and boost our external reserves. An increase in investment would translate into more jobs in the petroleum downstream sector. Smuggling of petroleum products across the border will come to an end with market pricing of refined products.”

Dr. Yussuf argued that palliatives should be segmented into immediate, short term and medium-term deliverables. 

“Immediate and short-term options include wage review in public service, electronic cash transfers to the vulnerable groups in our society, the designation of a few retail outlets [maybe 10% of the outlets] as subsidy stations while all others will sell at deregulated prices for a transition period of one year, the introduction of subsidized public transportation schemes across the country, and a reduction in import duties on intermediate products for food-related production to moderate food inflation”.

He further mentioned that in the medium to long term, there should be accelerated efforts to upscale domestic refining capacity, driven by private investments, and accelerated investments in rail transportation by the government to ease the logistics of fuel distribution across the country as well as domestic freight costs.

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EXPLAINER: How fuel subsidy removal affects you

Article Summary

• Small businesses, particularly those heavily reliant on transportation and high fuel consumption, will henceforth face increased operational costs.
• Higher fuel prices will directly impact their expenses for delivering goods, commuting, or operating vehicles.
• With higher fuel prices, transportation expenses will rise, potentially reducing employees’ disposable income. This could have a cascading effect on their overall financial well-being.
• Increased fuel prices can place an additional financial burden on students, who often have limited resources.

The recent announcement by the Nigerian government to remove fuel subsidies is a significant policy change that has garnered a wide range of reactions from different segments of society.

Fuel subsidies have been in place for several decades, aimed at keeping petrol prices affordable for the general population. The decision to remove these subsidies is expected to have a notable impact on inflation, particularly concerning transportation costs, food prices, and the prices of imported goods.

The removal of fuel subsidies will also affect small businesses, employees, and students in various ways. The impact will be felt across different sectors of the economy, regardless of location, and will depend on individuals’ ability to adapt to the changing economic landscape.

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Small businesses may face challenges in adjusting to higher fuel costs, as it directly affects their operational expenses. Transportation costs for delivering goods and services will rise, potentially impacting profit margins and pricing strategies.

Employees who rely on affordable fuel for commuting may face increased transportation expenses, reducing their disposable income.

Students who commute to schools or universities may also experience financial burdens due to higher transportation costs.

Overall, the elimination of fuel subsidies in Nigeria represents a significant shift in the country’s economic policy. While the intention may be to address fiscal challenges and encourage market-driven pricing, the decision’s impact on inflation, transportation costs, and individuals’ livelihoods cannot be overlooked.

Transportation 

•  Public Transportation Costs:  With the removal of fuel subsidies, the cost of diesel and petrol used in public vehicles is expected to rise. As a result, transportation companies, including buses, taxis, and motorcycles, are likely to increase their fares to offset the higher fuel costs. This will directly impact commuters, who will have to bear the burden of increased transportation expenses.

Food Prices 

•  Distribution Costs:  The higher cost of transportation due to the removal of fuel subsidies will affect the distribution of food products. Transporting goods from farms to markets and from wholesalers to retailers will become more expensive. These increased transportation costs will be passed on to consumers, leading to higher food prices.
•  Agricultural Production Costs:  Farmers heavily rely on fuel for various agricultural activities, including irrigation, machinery operation, and transportation of produce. The removal of fuel subsidies will increase their production costs, which can indirectly lead to higher prices for agricultural products, including grains, fruits, and vegetables.

Imported Goods 

•  Transportation Costs:  Imported goods are transported from seaports and airports to their respective destinations within the country. The removal of fuel subsidies will increase transportation costs, as fuel prices directly impact shipping and logistics expenses. As a result, the prices of imported goods, including electronics, machinery, and consumer products, are likely to rise.
•  Exchange Rates:  Fuel subsidy removal can also impact exchange rates. If the increased fuel costs lead to a rise in inflation and put pressure on the country’s foreign exchange reserves, it can result in a devaluation of the local currency. A weaker currency would make imported goods more expensive, further contributing to inflationary pressures.

Other Items 

•  Manufacturing Costs:  The manufacturing sector relies on fuel for various processes, such as powering machinery and transportation. The removal of fuel subsidies will increase manufacturing costs, potentially leading to higher prices for locally produced goods.
•  Energy Costs:  Fuel subsidy removal can also have an indirect impact on energy costs. If businesses and households rely on fuel-powered generators for electricity due to an unreliable power supply, the increased fuel prices will lead to higher energy expenses.

How it could affect small businesses 

Small businesses are the backbone of the Nigerian economy, providing employment and income for millions of people. However, they also face many challenges, such as poor infrastructure, high taxes, insecurity and corruption.

The removal of fuel subsidies adds another burden to their already strained operations. Fuel is a major input for many small businesses, such as transporters, generators, farmers, and traders. With the removal of fuel subsidies, the cost of fuel has increased by more than 100%, from N162 per er to N340 per litre.

This means that small businesses have to spend more money on fuel, which reduces their profit margins and affects their competitiveness. Some small businesses may have to reduce their output, lay off workers or even close if they cannot cope with the increased cost of fuel.

Employees are also affected by the removal of the fuel subsidy, as they have to pay more for transportation to and from work. Many employees rely on public transport, such as buses, taxis and motorcycles, which have also increased their fares due to the higher cost of fuel.

Some employees may have to spend more than half of their salaries on transportation alone, leaving little for other expenses such as food, rent and health care. Some employees may have to look for alternative sources of income or seek employment closer to their homes to reduce their transportation costs. Some employees may also face the risk of losing their jobs if their employers cannot afford to pay them or sustain their businesses.

Students are another group that is affected by the removal of the fuel subsidy, as they must pay more for transportation to and from school. Many students depend on public transport or private vehicles to get to school, which have become more expensive due to the higher cost of fuel.

Some students may have to drop out of school or defer their studies if they cannot afford the transportation costs. Some students may also have to cope with poor learning conditions, such as inadequate facilities, overcrowded classrooms and frequent power outages, as schools struggle to provide quality education with limited resources.

On a final note…

The removal of fuel subsidies is a controversial policy that has significant implications for the Nigerian economy and society.

• While the government claims that the policy will save money, reduce corruption and encourage investment in the oil sector, many Nigerians are sceptical about the benefits and worried about the negative impacts on their lives.
• The policy affects different segments of society differently, but small businesses, employees and students are among the most vulnerable and hardest hit by the increased cost of fuel.
• The government should consider the plight of these groups and provide adequate support and compensation to cushion the effects of the policy.

Omono Okonkwo

Omono Okonkwo is an accomplished Mass Communicator, with a remarkable track record spanning over a decade across various dimensions of the field. Her proficiency encompasses Print, Digital, and Broadcast Journalism, Copywriting, Research and Writing, Podcasting, Public Speaking, as well as a comprehensive grasp of Energy Markets. Her engagement in energy market coverage commenced officially in 2016, as she assumed the role of a country correspondent (Nigeria) with Natural Gas World, a subsidiary of Minoils Media based in Vancouver, Canada. Since then, Omono Okonkwo has consistently demonstrated excellence and left an indelible mark on the ever-evolving energy sector.

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Perhaps one should also give the other side of the picture and speak about the benefits of the subsidy removal to the nation and ultimately to the people.

1) Greater economic efficiency as distortions in the daily supply and demand of fuel are removed 2) Fiscal sustainability which in turn could reduce inflation and improve access to credit for SMBs and individuals as government borrowing is reduced and more savings is available for private investment 3) More market competition in the petroleum sector, improving quality of products and services 4) Targeted social programs can be designed to be delivered only for the benefit of the poor 5) Greater environmental considerations as cleaner and sustainable energy become more cost effective, scalable, and competitive for consumers and businesses to use 6) Reduced corruption and greater transparency in government 7) Better foreign exchange management as the FG is no longer the greatest source of demand of foreign exchange 8) Resource reallocation as funds are freed up for more pressing needs in areas like infrastructure, healthcare, education 9) Improved market efficiency as more efficient pricing eliminates the presence of shortages and substandard products 10) Long-term development and diversification of the economy as oil and gas is no longer given preeminence in Abuja’s policy decision making.

I could go on, but the positives definitely outweigh the negatives.

This is excellent!

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The Economic Implication of Fuel Subsidy Removal in Nigeria

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(Jigawa State Polytechnic, Dutse, Nigeria)

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