How Tinubu’s Fuel Subsidy Bombshell Rocked Nigeria

Patrick OdeyJune 4, 2023

5 minutes read

Nigeria has been thrown into chaos since President Bola Tinubu announced the immediate removal of the fuel subsidy regime on Monday, May 29, 2023, during his inauguration speech.

The fuel subsidy is a government intervention that pays part of the cost of importing refined petroleum products for domestic consumption, thereby reducing the pump price for consumers.

The subsidy was introduced in 2000 to cushion the effect of rising global oil prices and to stimulate economic growth in Nigeria, Africa’s largest oil producer.

However, over the years, the subsidy has become a source of controversy and corruption, as it consumes a huge chunk of the national budget and benefits mostly the oil marketers who allegedly inflate their import claims.

According to the Nigeria Extractive Industries Transparency Initiative (NEITI), the government spends about N3.6 trillion ($7.8 billion) annually on fuel subsidies.

Many analysts and stakeholders have called for the subsidy to be abolished or reformed, as it is unsustainable and distorts the market.

However, previous attempts to remove or reduce the subsidy have been met with stiff resistance from the public and the labour unions, who see it as one of the few benefits they enjoy from the government.

The most notable example was in January 2012, when former President Goodluck Jonathan tried to scrap the subsidy but was forced to backtrack after massive protests that paralysed the country for two weeks.

Tinubu, who succeeded Muhammadu Buhari as Nigeria’s 16th president after winning a tight election in February 2023 with 37 percent of the votes, took a bold and risky step by ending the subsidy on his first day in office.

He justified his decision by saying that the subsidy was no longer affordable and that the funds saved would be invested in infrastructure, education, health and job creation.

He said: “The fuel subsidy is gone. It is unsustainable. We shall instead re-channel the funds into better investment in public infrastructure, education, healthcare and jobs that will materially improve the lives of millions.”

Tinubu’s announcement triggered panic-buying and hoarding of fuel across the country, as oil marketers quickly adjusted their prices to reflect the market realities.

The official pump price of petrol rose from N195 ($0.42) per litre to N577 ($1.24) per litre within days, according to the Nigerian National Petroleum Corporation (NNPC), which regulates the sector.

However, different prices prevailed in different parts of the country, depending on availability and demand. In some states in the south-east and north-east regions, petrol sold for as high as N700 ($1.51) per litre.

The hike in fuel prices had a ripple effect on other sectors of the economy, as transport fares soared and inflation spiked.

Many Nigerians, especially low-income earners and workers in urban areas, were stranded or unable to afford their daily commute.

Chioma Anthony, a midwife in Abuja, told Newsflash Nigeria that she could not go to work on Thursday because she did not have enough money to pay for transport.

She said: “The transport fare from Dutse to Berger has increased from N300 ($0.65) to N800 ($1.72). How do you expect me to pay that every day? How much is my salary?

“Some of my colleagues have stopped coming to work since Tuesday because they can’t cope with this situation. This thing was done without proper planning. There is no plan to cushion the effect on us.”

Anthony urged Nigerians to protest against the subsidy removal, saying that it would lead to more hardship and suffering.

She said: “This is not fair. This is not what we voted for. We need to stand up and say no to this injustice. The government should reverse this decision or provide alternatives for us.”

However, some Nigerians supported Tinubu’s decision, saying that it was necessary and long overdue.

Alhaji Yerima Shettima, National President of the Arewa Youth Consultative Forum (AYCF), a northern socio-political group said that Nigerians should be patient and realistic with Tinubu’s administration.

He said: “Every regime comes with its own style. Tinubu’s own came with the total suspension of the fuel subsidy. The truth is that Nigerians need to face reality, and the reality is that you can only give what you have. The economy is bad. It is better for him to take that action than to be talking just to impress Nigerians.”

Shettima said that the fuel subsidy regime was a waste of public funds and a source of corruption, and that it had to go.

He said: “The subsidy has to go. I trust Nigerians that we will soon adapt to it. The government is not so irresponsible that they do not have other programmes to cushion the effect.

“He (Tinubu) had said that he was going to make sure that one or two refineries work before the end of this year. Then, maybe subsequently, other things like transportation will be put in place.”

Shettima urged Nigerians to cooperate with the government and contribute to the development of the country, rather than always complaining and demanding.

He said: “Let us bear with the government. Let us also find a way to contribute to the well-being of this country rather than always complaining about what the government should do for us.”

Meanwhile, the Nigeria Labour Congress (NLC), the umbrella body of trade unions in the country, has declared a nationwide strike from next Wednesday to protest against the subsidy removal and its effects on workers and citizens.

The NLC made the announcement after its National Executive Council (NEC) meeting in Abuja on Friday.

The NLC President, Ayuba Wabba, said that the strike was inevitable and that the union would not accept any further increase in the price of fuel or electricity tariff.

He said: “We are here to make a formal announcement of our NEC resolution. We have decided to reject in its entirety the issue of hike in fuel prices and we have also directed our organs to mobilise for an indefinite nationwide strike.”

Wabba said that the NLC would also join forces with other civil society organisations and activists to resist the subsidy removal and demand for social justice.

He said: “We are going to work with other platforms, civil society organisations and activists to ensure that this protest is effective. We are not going to compromise on this issue because it affects our lives and livelihoods.”

On the positive side, there are indications that the government is aware of the negative impact of the subsidy removal on Nigerians and is willing to take some measures to mitigate it.

President Tinubu said on Friday that his administration would review the current national minimum wage of N30,000 ($64.60) per month in view of the current economic situation.

He said that improving the living standards of Nigerians was still a priority for his administration and that the minimum wage needed to be adjusted to reflect realities.

He said this at the State House in Abuja when he received members of the Progressive Governors Forum (PGF), led by its chairman, Governor Hope Uzodinma of Imo State.

He said: “We need to do some arithmetic and soul-searching on the minimum wage. We will have to take a look at that together, and the revenue. We must strengthen the source and application of our revenue.”