Nigerians are currently dealing with the surge in the price of Liquified Petroleum Gas (LPG) commonly referred to as cooking gas, which price has risen from between N384 and N400 per kg a few months back to between N700 and N800 per kg currently.
This is amid the high cost of other fuels such as kerosene and diesel. A litre of diesel, which many industries rely on, due to the epileptic nature of power supply in the country, is coasting towards N400 currently.
The concerns and reservations expressed by Nigerians when the minister of finance and national planning, Zainab Ahmed, announced that the federal government would be removing all subsidy on Premium Motor Spirit (PMS) otherwise known as petrol, beginning from 2022, were therefore expected.
Even before the minister’s announcement, it was already apparent with the passage of the Petroleum Industry Act (PIA), that there would no longer be subsidy on petrol, as the act makes no provision for it. According to the Act, petroleum products are to be deregulated with effect from July 2022.
Over the years, there has been a lot of hue and cry about payment of petrol subsidy in the country, which economists argue is enmeshed in a lot of corruption.
In 2012, a move by then President Goodluck Jonathan to remove petrol subsidy was met with stiff resistance by citizens, labour unions and opposition politicians who argued that it was one of the few things the masses enjoyed from the government and so should be let be.
The federal government’s position that there was a lot of corruption around subsidy payment and that the money used to pay for subsidy would be put to other uses for the benefit of all Nigerians and not just those who use petrol was not strong enough to convince the people and so, the government lost that round.
For others like Kaduna State governor, Nasir el-Rufai, who was one of the prominent voices against the removal of petrol subsidy in 2012, major beneficiaries of fuel subsidy in Nigeria are smugglers, neighbouring African countries, and a few rich people in Nigeria and so, it should be done away with. He is of the view that the hullabaloo about petrol has to end and that the country cannot continue to provide cheap petrol to neighbouring countries, some of whom have had to close down their own refineries.
To him, the fuels that matter to the masses are kerosene and to industries, diesel, both of which are already deregulated and nothing has happened. So ‘kini big deal’ if subsidy on petrol, which makes the NNPC remit N14 billion instead of N120 billion to the federation account monthly, is removed?
It is instructive to point out that there is no provision for subsidy payment in the 2022 budget beyond June as provision for subsidy has only been made for the first six months of the year but to make up for this, the government plans to pay a transportation palliative of N5,000 to 40 million poor Nigerians out of over 200 million Nigerians who use petrol and enjoyed the subsidy one way or the other. The government says it will pay the transport palliative for a minimum of six months and maximum of 12 months.
In the 2021 budget, subsidy payment was said to have cost the country N1.8 trillion. The transport palliative proposed by the government for 40 million Nigerians will cost no less than N2.4 trillion.
In Nigeria, when the cost of petrol goes up, the price of every other thing, especially food goes up.
In an economy where food inflation has been on the rise for the 24th consecutive month, and is currently at 20.75 per cent, owing to further increases in the prices of basic food items the multiplier effect of this on food inflation can best be imagined. Transportation, which the government intends to subsidise is just one of the effects.
Another thing to factor is that in a deregulated market, market forces determine commodity prices. So when the Group Managing Director of Nigeria National Petroleum Company (NNPC), Mele Kyari said petrol would be sold at between N320 and N340 post subsidy removal, did he mean that the price of the commodity would still be regulated and determined by the state and not market forces?
About the transportation palliative, which vote in the budget would the spending be made from, as from July 2022?
Also, how do you spend more to solve a problem you were spending less on?
While it is true that subsidy payment is not sustainable, this proposition by the federal government does not seem well-thought out to me and appears to me like what they call voodoo economics.
Consequently, as much as I try to make sense out of it, I am unable to.
Maybe it is not the government’s fault but totally mine and that of millions of other Nigerians out there that we are unable to grasp simple economics.
Howbeit, the government will have to pardon our dumbness and make it make sense because as it is right now, it doesn’t make sense.
The Lagos Chamber of Commerce and Industry (LCCI) is of the view that the estimation of investment in palliatives should be compared with investment in transport infrastructure and see which impacts more on the masses. It is the view of the LCCI that investment in transport infrastructure to ease the hardship on citizens is a more sensible thing to do at this time.
I cannot agree more.
