Barring change of circumstances, the payment of petroleum subsidy will end by June this year, as hinted by the Minister of Finance, Budget and National Planning, Zainab Ahmed Shamsuna.
According to the minister, the World Bank has released the sum of $800 million to pay palliatives to Nigerians in order to cushion the effects of subsidy removal. Though advanced countries of the world offer subsidies to their people in different aspects of human development, in Nigeria, petroleum subsidy has become a thorn in the flesh of governments in power.
Successive administrations including the outgoing one had tried to stop the payment of subsidy but could not succeed. It is estimated that in the last 16 years, the Nigerian government has spent a whopping sum of $30 billion as petroleum subsidies. These huge sums could have been used to revamp our ailing power, fix our decayed education and above all meet our infrastructure deficit.
There is no gainsaying the fact that subsidy payment has raised more questions than answers. The money guzzling intervention has been dogged by corruption. It is alleged that marketers in collaboration with some corrupt government officials feed fat from the programme through bogus submission of false claims.
Subsidies are a form of government intervention set to reduce the cost of fuel by providing direct financial support to oil companies, and as such, subsidising the product to consumers.
Nigeria is one of Africa’s largest producers of crude oil, and it relies heavily on this resource for its economic growth. In addition, oil accounts for Nigeria’s GDP and provides employment opportunities for many Nigerians.
The history of fuel subsidy dates back to October 2000, and it was due to supply inadequacies from the country’s four refineries.
Subsidy encouraged the overconsumption of petroleum products, leading to increase in air pollution and greenhouse gas emissions, discouraging investment in the domestic refining industry and alternative energy sources.
In terms of monetary cost, the government spends N400 billion monthly to subsidise the product. The cost of maintaining it is unbearable amid dwindling revenue generation due to massive oil theft.
Given these issues associated with fuel subsidy programmes, it is clear that there is the need for it to go.
The new government should come up with comprehensive reforms aimed at addressing these challenges if Nigeria is to achieve sustainable development through petroleum-generated revenue.
The Tinubu’s incoming administration which will inherit petroleum subsidy should consider complete deregulation of the petroleum sector to allow market forces to determine the prices. This would reduce the burden on the government to provide subsidies, encourage competition, and attract more private investment into the sector. Lastly, the incoming government should incentivise investment in renewable energy sources such as solar and hydropower for speeding national development.
Ibrahim Mustapha, Pambegua, Kaduna State
