The issue of fuel subsidy in the downstream sector of the nation’s oil industry has remained a controversial if not sensitive subject that has refused to go away. Successive Nigerian governments had subsidised fuel for decades and fixed retail prices of petroleum products. Politicians both under the military dispensation and also within the prevailing democratic system consistently played on the psyche of Nigerians who rely on the commodity for domestic and industrial purposes using petroleum subsidy as carrot and stick depending on which side one was analysing the issue.
Its price often dictated by officialdom devoid of the application of the principles of market forces makes it difficult for players and non-players in the industry to fully understand its intricacies. Because of the huge financial outlay purportedly spent on it, in most cases running into billions of Naira annually, economic and financial experts, local and foreign, have come to see it as a misapplication of resources.
What, until now, that was lacking in the discussions on the matter is the political will to, in a manner of speaking, bite the bullet and resolve the issue once and for all. At a point, it was considered politically suicidal to even consider withdrawing the facility with all the perceived lack of transparency in its administration.
Oil subsidy, in itself, is not altogether a bad thing because the intention was to shield the average consumer from the unstable price fluctuations instigated, often, by the vagaries in the international oil market. What is disagreeable was the abuse of the process of implementing the otherwise noble policy. It became a source of political patronage that denied the common man in the street the benefits enunciators of the policy, ab initio, contemplated.
Like a honey pot, it attracted all kinds of characters who saw in it a veritable means of having access to and cutting their own piece of the national cake with all the negative connotations that implies. The situation became so corrupt and unacceptable that there were strident calls for the review of the policy, because it must be admitted, the helpless and hapless consumer became rather a victim of its bastardisation. In 2018, the Nigeria Extractive Industry and Transparency Initiative (NEITI) claimed that the country spent about N722.3 billion on fuel subsidy while the Nigeria Natural Resource Charter (NNRC) in its 2019 benchmark report put the figure at N750 billion. From these figures, it is certain that the nation’s economy was hemorrhaging. The wastage had to stop.
It is from this perspective that we commend the courage and the conviction of the federal government through the Minister of State for Petroleum Resources, Chief Timipre Sylva, who recently announced that the downstream sector has been deregulated, meaning that the policy has been rested for good. This, we posit, will expectedly, prepare ground for an appropriate pricing of the commodity.
Two matters, in our view, expedited action on the decision of the federal government to say enough is enough as regards the abuse in the system. The oil price war between Russia and Saudi Arabia led to a crash in the international oil marketplace. This battle of wits between the two giants was compounded by the COVID-19 pandemic which dealt a heavy blow on world economy generally, reduced demand and brought the price to an all-time low of below $30. It was obvious that a time will come when something will definitely give in order to nudge the authorities in the right direction.
In an earlier editorial, this newspaper had urged the government to use the prevailing circumstance in the oil market to commence the process of deregulating the sector. We hereby reaffirm that position.
While the government has taken its decision, we commend the Minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed, who ruled out the idea reinstating the fuel subsidy regime, explaining that all the decisions are targeted at weathering the challenges posed by the COVID-19 pandemic. She defended the fuel subsidy removal, saying it constituted a drain on the country’s meagre resources. The Minister said the cost of the product would henceforth be determined by the vagaries of the international crude oil market, stressing that incurring further costs on under-recovery has now been stopped permanently.
All said, we need to point out that this policy shift is not likely to sit well with entrenched interests. Regardless, it is a welcome development. The federal government must ignore those economic parasites and focus its attention on the overall interest of the ordinary Nigerian who had waited for this moment to come.