Sunday, January 19, 2020
Sharp-Journal > Explainers > Fuel Subsidy: Should Nigerians Let Go Or Not?

Fuel Subsidy: Should Nigerians Let Go Or Not?

Fuel Subsidy

In January 2012, Nigeria was completely shut down when former President Goodluck Jonathan took the decision to discontinue the subsidizing of petroleum pump price. Fast forward to 2015, there are indications that the government of President Muhammadu Buhari may finally withdraw government funding of fuel subsidy. But what is the difference between the decision of 2012 and the propositions of 2015. How apt or convenient is removing fuel subsidy at the moment? What are the palliative measures needed to be put in place to cushion the effect of eventual removal of fuel subsidy?

To let go or not is the big question of necessity staring at everybody. How prepared are Nigerians to face the consequences or fallout from subsidy removal. President Buhari must be able to give cogent reasons for any eventual removal of subsidy. Mr. President and Minister of State for Petroleum, Mr. Ibe Kachikwu, should be ready to face a barrage of questions from Nigerians if the decision to remove fuel subsidy is however, adopted.

Importation of refined petroleum products (Petrol, Kerosene, Diesel) have been a long standing headache to Nigerians, as there is no significant effort to build functional refineries by the Federal Government over the years. The oil sector is like a direct access to looting of this country, with minimal effort to checkmate kleptomaniacs in the industry and collaborators in government. Despite having crude oil in abundance, Nigerians still suffer inexpressible hardship to get fuel which is naturally secreted here.

The discovery of oil in Nigeria has been a curse rather than a blessing. Other oil producing countries of the world have used oil to speed up development of their country but Nigeria has been rendered impoverished by mean aristocrats who hijacked the collective wealth of the people.

The argument in 2012 was that, government can no longer foot the bill of fuel subsidy, that it has become burdensome. The plea was rejected by the majority citing there were no remedial structures on ground to solve the problem of fuel subsidy as it were.

In 2011/2012, the price of crude at the international market was $114 per barrel and government claimed the landing cost of a litre of petrol was N97. Hitherto, the pump price of PMS in Nigeria was between N65 to N70. But, it was tilted up to N97, which means there was partial removal of subsidy. Moreover, the administration of Jonathan promised to reinvest proceeds from the partial removal of subsidy judiciously. The promise of reinvesting monies saved from fuel subsidy was the singsong of Ngozi Okonjo-Iweala, Labaran Maku et al. However, from 2012 to the end of Jonathan’s administration, accrued money from this exercise was either mismanaged or squandered. Instead of having a ‘re-investment,’ it was a case of ‘divestment’ by stakeholders involved. And that is why some Nigerians believe that the whole arrangement of subsidy is an illusion.

On the other hand, now that the price of crude oil has plummeted beyond expectation, some Economists and even the World Bank are advising that Nigeria should remove subsidy, since international crude oil sale is below $35 per barrel and save fund meant for this purpose. In fact, many Nigerians are averse to the nonstop servicing of fuel subsidy debt. There is an assertion that there is no subsidy but a set of cabal in the oil sector and collaborators within the government are responsible for the creation of it. How true this statement, is not the bone of contention. But, what the government can do to solve the problem of ‘fuel scarcity’ viz-a-viz ‘subsidy removal’ is the subject of concern.

So, to let go or not, what option is most favourable at the moment? To let go of fuel subsidy demands that the Federal Government put in place palliative or soothing measures to give Nigerians a soft landing. Even with what is obtained presently, it is very difficult for Nigerians to purchase fuel without queuing or shortchanged. Pump price is not the same across Nigeria, as marketers have devised means (hoarding) of causing artificial scarcity whenever there is a clash with government over non-payment of subsidy debt, and the deliberate adjustment of pump price by some marketers even when ‘all is well’ just to rip-off Nigerians.

Nigeria cannot move forward if this kind of humongous corruption continues. There is urgent need to build refineries at all cost to save Nigerians from this nightmare. Billions of Naira was expended under the watch of former President Jonathan to revive the ailing existing refineries getting them to optimum production capacity, but again, there was a feast of corruption. Those monies may as well be used to build a world class refinery as against the waste of fund on repairs. As usual, loot of this magnitude carries along mutual collaborators—the big influence of the oil cabal and the ‘dynamic magic wand’ of government officials have rendered every effort to completely revamp the existing refineries unsuccessful.

President Buhari should be concerned about this big factor (having functional oil refineries) as an economic determinant. The oil sector is the number one source of revenue to Nigeria, and bearing in mind the dwindling state of Nigeria economy, it is reasonable or expedient that the government block all leakages to fleecing of government treasury in the name of fuel subsidy. The profound corruption in the oil sector has denied Nigerians the perks of being an oil producing country. There are two options for Nigerians to consider: option of acceptance to remove fuel subsidy and the option to decline. They are highlighted below.


  • Less economic hardship
  • Interim enjoyment
  • Stability in price of goods
  • Extortion by marketers (irregular pump price)
  • Deliberate hoarding by marketers
  • Comatose refineries
  • Continuous fleece of government coffers
  • Violence and environmental degradation (illegal bunkering)
  • Reduction in government capital projects (insufficient annual budget)
  • Continuous servicing of subsidy debt.


  • Price inflation of goods
  • Interim transport hardship
  • Interim economic hardship
  • Sporadic increase in PMS (Premium Motor Spirit) pump price
  • Artificial scarcity (Sabotage by oil marketers)
  • Reinvestment of subsidy fund
  • Elimination of oil cabal
  • Reduction in corruption/blocking of oil thieves
  • Boost to Nigeria annual budget
  • Birth of new refineries.

The above options are what Nigerians must consider in the next few months whether to let go or not on government funding of fuel subsidy. What can bring realization of these options is however, government readiness to proffer measures that would aid smooth transition to the option of subsidy withdrawal or adopt modalities to continue the servicing of subsidy bills. If the option of complete subsidy removal is adopted by the government of Buhari, the following measures should be taken in to cognizance.


  • Make room for modular refineries as against having just the capital intensive ones
  • Expedite reforms in the oil sector (deregulation)
  • Give a benchmark for PMS pump price
  • Regular monitoring of filling stations by PPPRA (Petroleum Products Pricing Regulatory Agency)
  • Develop efficient local refineries
  • Overhaul Ministry of Petroleum
  • Regular audit of Ministry of Petroleum (Transparency and accountability)
  • Give out more licenses to build refineries
  • Augment existing refineries and put up a maintenance structure.
  • Still allow importation of refined oil by marketers but at no cost to the Federal Government.
  • Importation of refined oil by NNPC to mitigate any shortfall arising from subsidy removal.

Tell us your preferred option: to let go or not?

You can support us by liking our Facebook page and ff @Sharp_Journal

Sharing is caring. Share the joy!
  • 469