A closer look at the contradictory reports on subsidy removal and its impact on Nigeria’s economy
The Nigerian government has found itself once again embroiled in a debate over the subsidy removal, leaving citizens confused about the true status of the subsidy and its implications. Reports from 2016 and 2023 present conflicting narratives, raising questions about the government’s stance on this critical issue.
Back in August 2016, Vice President Yemi Osinbajo claimed that the federal government had saved a significant amount of N1.4 trillion by eliminating the oil subsidy. Addressing the public during a meeting in Kano, Osinbajo highlighted the benefits of deregulating the downstream petroleum sector, leading to increased petrol availability across the country. He also mentioned a more flexible exchange rate regime, which would alleviate pressure on external reserves but could result in short-term inflationary consequences.
These assertions seemed to suggest that the oil subsidy had indeed been removed in 2016, signaling a shift towards a deregulated oil industry. However, fast forward to 2023, and another government, led by the All Progressives Congress (APC), claims to have saved approximately N400 billion since the official implementation of the subsidy removal on May 31, 2023. Oil marketers confirmed this substantial sum and hinted at the likelihood of an increase in petrol prices in the coming month due to the recent floatation of the naira against the US dollar.
Chinedu Okonkwo, the National President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), shed light on the matter. He stated that the government had divulged information about its previous monthly expenditure on subsidy, indicating substantial savings due to the subsidy removal. The Nigerian National Petroleum Company Limited (NNPCL) had revealed the astronomical figure of over N400 billion spent monthly on subsidy, prompting the government’s decision to halt the regime in May.
While it remains unclear what subsidy was supposedly removed in 2023, industry operators and stakeholders are grappling with the consequences of these contradictory reports. Okonkwo expressed his belief that the government was currently benefiting from the removal of subsidy, accumulating substantial sums of money. Nevertheless, he cautioned that petrol prices might rise in response to fluctuating forex rates. He emphasized that market fundamentals would determine the pricing and capping of petrol, suggesting that a truly deregulated market would experience fluctuating prices based on supply and demand dynamics.
Billy Gillis-Harry, the President of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), echoed Okonkwo’s sentiment. He highlighted the direct correlation between petrol prices and the exchange rate, stating that the current high forex rate would likely lead to increased petrol costs. However, he expressed optimism that the new government, led by President Bola Tinubu, would work towards stabilizing the exchange rate, ultimately resulting in more affordable fuel.
In light of these contradictory reports, the question arises as to whether the oil subsidy was genuinely removed in 2016, as claimed by Vice President Osinbajo, or if it was eliminated in 2023, as indicated by the recent statements from oil marketers. The lack of clarity surrounding this issue raises concerns about transparency in government communications and calls for a comprehensive explanation from the authorities.
As Nigerians grapple with the potential ramifications of subsidy removal, they remain hopeful that the government will provide clear and concise information about its economic policies. Clarity and transparency are essential to restore public trust and ensure that the benefits of these decisions, whatever they may be, are felt by all citizens. Only then can Nigeria chart a path towards a stable and prosperous economy.