A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributed as subventions in an industry to prevent the decline of that industry. Subsidies are used to cushion the price effect of products or commodities or services to the consumer; hence, it is used to control price in an economy and ensure the consumer can afford such commodity.
Crude oil in Nigeria, since its discovery in commercial quantity in 1956, has been the main economic stay of the country. Mbendi (2012) reveals that Nigeria is the 10th largest oil producer in the world, the 3rd largest in Africa and the lost prolific oil producer in sub-Saharan Africa: Nigeria is a member of the Organization of the Petroleum Exporting Countries (OPEC). The oil industry in Nigeria is regulated by the Ministry of Petroleum Resources who retains close control over the industry and activities of the Nigerian National Petroleum Corporation (NNPC). The Federal Government of Nigeria, as reported by Chiejina (2012), over the years operated Fuel Subsidy regime aimed at making petroleum products available for its growing population to mitigate the effect of actual market prices of the product on the general populace.
On May 29, 2023, the Fuel Subsidy was removed. However, this action came as a surprise to the masses in major cities of the country. According to President Bola Ahmed Tinubu, “Subsidy is the elephant that was going to bring Nigeria to its knees.”
President Tinubu gave reason why he ended petrol subsidy. Tinubu, who spoke at the meeting with the National Council of Traditional Rulers of Nigeria (NCTRN) in Aso Rock, said subsidy would have brought Nigeria to its knees. He stated that he did the right thing by removing the subsidy, noting that his administration operates an open door policy that will accommodate contributions from individuals.
His speech, according to the Villa’s director of information, Abiodun Oladunjoye,
“I am grateful that you are paying attention to what I have been doing.
“You have paid attention to the subsidy removal. Why should we in good heart and sense, feed smugglers and be Father Christmas to neighbouring countries, even though they say not every day is Christmas?
“The elephant that was going to bring Nigeria to its knees is the Subsidy. A country that cannot pay salaries and we say we have potentials to encourage ourselves.
“I think we did the right thing.
“We are all ears. We are ready to listen at any given time. I promise you an open door policy and that is why I will go. That open door policy is for you to call me and send to me at any given time any concern that you might have.
“We may not have it right 100 percent of the time but we must get it right 90 percent of the time for this country.”
However, the removal of fuel subsidy has both positive and negative effect on the country and the masses as a whole. In the aspect of its positiveness, the government argued that the removal of the heavy subsidy would free up funds for other public services, including health and infrastructure project, and the liberalization of the fuel industry would benefit the economy.
According to the National Orientation Agency, removing fuel subsidy in the country will stop corruption around what is known as the Subsidy regime, which has made some individuals stupendously rich without industry. Now, this will bring about a resource balance and will be of benefit to majority of the populace.
The subsidy removal will also put an end to the smuggling of Nigeria’s Premium Motor Spirit (PMS) – petrol to neighbouring countries, which is an organised theft and diversion of the PMS aided by the country’s easily penetrated borders, which affect the economy. The development will solve the problems of perennial fuel scarcity and the attendant hardship on citizens, thereby stimulating responsible consumption and reducing waste as the price become more market reflective.
It will also help in the growth of domestic refineries, which in turn will create job for Nigerians, and with competition in industry and market forces, there will be a drive down in the price in the long run.
The fuel subsidy removal will crib the greed for higher profits and deliberate sabotage by a few players in the oil industry, which will positively affect the economy of the country.
In the past, Nigeria paid N400 billion monthly on fuel subsidy payments. What the removal means is that the government will put the money to use in other sectors like education, health and other infrastructural development.
Presently, the people hope to see the results in few months and expect ease in the current situation.
The negative effect of the removal of fuel subsidy has affected the masses gravely. The masses did not consider the President’s reason vital, the issue of the subsidy removal is currently causing many Nigerians to undergo difficulties in their daily survival. The issue is however only benefiting the petroleum products’ dealers and some traders, but hurting the masses, the masses who are trying to recover from the suffering they went through during the naira redesign policy.
The removal of the subsidy has affected the cost of transportation due to the increase of fuel price, as well as the price of food. The higher cost of transportation due to the removal of the fuel subsidy has affected the distribution of food produce, thereby leading to high cost in food products. Transporting goods from the farms to markets and from wholesalers to retailers become more expensive. These increased transportation costs affect the consumers, leading to higher food prices. The removal of the fuel subsidy also affects many individuals in different positions and some sectors.
As a student of Delta State University, I depend on public transport to get to school, which has become more expensive due to the higher cost of fuel. Some students may have to drop out of school or defer their studies if they cannot afford the transportation cost, and also due to the challenges the removal of the fuel subsidy have caused.
The masses hope and believe for a rapid change to these issues of the fuel subsidy removal affecting them. Therefore, appeal to the government as they expect ease on the current situation.
Favour is a student of the Department of English and Literary Studies of Delta State University, Abraka