The Nigerian National Petroleum Company Limited (NNPC) and fuel marketers, represented by the Independent Petroleum Marketers Association of Nigeria, found themselves in a renewed dispute on Tuesday regarding the elimination of the petrol subsidy. This disagreement unfolded amid the ongoing depreciation of the naira against the United States dollar in both the official Investors & Exporters Window and the parallel market.
On Tuesday, the official market recorded a closing rate of 998 naira/dollar, while the black market saw it trading at 1,225 naira/dollar. As the naira weakened, economists and oil marketers argued that the subsidy on Premium Motor Spirit (PMS or petrol) had been increasing. However, the NNPC refuted these claims, asserting that it was fully covering its importation costs of petrol.
The Chief Executive Officer of the Financial Derivatives Company, Bismarck Rewane, countered these assertions during a live television program on ChannelsTV on Sunday. He explained that the fuel subsidy had not been entirely removed but had been reduced.
The dilemma of fuel subsidy in Nigeria
Fuel subsidies have always been a source of contention in Nigeria. It simply refers to the government’s practice of providing financial support to keep fuel prices lower than the market rate. It has been a longstanding policy in Nigeria to make fuel more affordable for citizens. However, in May 2023, President Bola Ahmed Tinubu removed the fuel subsidy, which led to a significant increase in fuel prices, from N190 per litre before the announcement to N600 per litre afterward. Now there might be a potential increase of N1200 per litre.
Critics argue that fuel subsidy removal is a burden on the country’s economy, as it places a significant strain on government finances. They say that the funds allocated for the subsidy could be better utilised in other sectors. These include education, healthcare, and infrastructure development.
On the other hand, proponents of the subsidy argue that it is necessary to protect the citizens from the impact of rising fuel prices, which could lead to increased costs of transportation and basic goods.
Reactions to Fuel Subsidy Removal
The renewed discussions about removing or reducing the fuel subsidy in Nigeria have sparked some reactions from the public. Most of the population has expressed concerns about the potential increase in fuel prices and its impact on their daily lives. We spoke to some women about their thoughts on the potential rise in prices.
Zainab complains about how the changes in fuel prices make her second-guess her movements. “I have even started trekking more, and I only go out when necessary,” she cries. She further explains the effect: “We have stopped using the generator, so when there is no light, it is a blackout.” The potential increase in fuel prices makes her weary.
Best, currently serving the country, has the same concerns as Zainab, “It might affect my movement, even my relationship, because there is no money to transport me to dates.”
For Safiya, who sells veils, this new development affects her business. Her patronage is no longer as high as it used to be. “The delivery fee irks them, rendering my business slow,” she explains.
Her profits have also dropped, as she has observed “high costs of goods with low profits.” “The cost of transporting the goods to me from my supplier might triple; it affects me o,” she concludes.
Asiya, who recently graduated with a degree in sociology from Ibrahim Bababinga University, also laments how the fuel price increase will ultimately affect the price of everything, especially foodstuffs. “Even the cost of transportation will skyrocket. It will affect me because I’m poor,” she cries.
The fuel subsidy issue in Nigeria remains a contentious subject. There are conflicting perspectives from the NNPC and fuel marketers. The recent dispute, exacerbated by the depreciation of the naira, underscores the ongoing challenges and complexities surrounding subsidy removal. Achieving a consensus that addresses economic concerns while ensuring fair pricing for consumers remains a critical task for stakeholders in Nigeria’s energy sector.