By Alao Michael
Fuel subsidy removal is a complicated subject that affects Nigerians. Removing fuel subsidies is frequently viewed as a step in the direction of market liberalisation and fiscal sustainability. To ease financial strains,
foster market competition, and address environmental issues, many nations, especially wealthy ones, have abandoned fuel subsidies. Fuel subsidies frequently result in inefficiencies, price distortions, and resource misallocation. Governments can shift funding to other top priorities like infrastructure development, healthcare, and education by removing subsidies. Removing fuel subsidies can also promote the use of greener, more sustainable energy sources, assisting in efforts to tackle climate change on a global scale.
The reduction or removal of gasoline subsidies is a complex subject in Africa. Some African nations, especially those that produce oil, have historically relied on gasoline subsidies to lessen the burden of high fuel prices on their populations. Due to the strong correlation between fuel costs and the prices of necessary products and transportation, these subsidies are meant to reduce poverty and social unrest. However, fuel subsidies frequently put a strain on national budgets by taking money away from necessary areas. Additionally, they can promote corruption, aid and abet smuggling, and support illegal trade. A detailed analysis of socio-economic conditions and the implementation of targeted support measures are necessary for the removal of subsidies in Africa to safeguard disadvantaged communities against unexpected price hikes.
The removal of fuel subsidies in Nigeria has long been a sensitive topic. Despite being a major producer of oil, the nation has suffered from corrupt practices in the petroleum industry, ineffective refineries, and fuel imports. Nigeria’s economy has suffered greatly from fuel subsidies, which cost the government billions of dollars per year. Despite the subsidies, there has often been a shortage of fuel and a large line at the gas stations. In Nigeria, removing gasoline subsidies aims to address these issues and promote private sector investment in refining capacity. Removing subsidies, however, may also result in higher gasoline costs, which may disproportionately affect people with low incomes and intensify inflationary pressures. Governments must create and put into place social safety nets, such as targeted cash transfer programmes, to safeguard society’s most vulnerable groups to lessen these effects.
Over several decades, there have been several policy changes and controversies surrounding the history of subsidy removal in Nigeria. Nigeria, an oil-producing country, instituted gasoline subsidies in the 1970s to maintain low domestic fuel prices and guarantee affordability for its residents. The subsidies were put in place to lessen the effects of rising international oil costs as well as to encourage economic growth and stability inside the nation. Nigeria faced economic difficulties in the 1980s, including a drop in oil prices and an increase in debt. Structural Adjustment Programmes, which sought to overhaul the economy and scale back government intervention, were consequently launched by the government in 1986. SAPs included lowering subsidies and deregulating particular industries, including the petroleum sector. However, later governments only partially restored the subsidies as a result of societal unrest and demonstrations over their withdrawal.
Under former President Olusegun Obasanjo’s administration, the government partially eliminated fuel subsidies in June 2003. Fuel prices at the pump were raised, sparking demonstrations and widespread strikes. The government eventually lowered the costs in response to the demonstrations, and subsidies were partially restored. President Goodluck Jonathan’s administration declared in January 2012 that all fuel subsidies would be removed. Numerous nationwide rallies, strikes, and riots were sparked by the ruling. Citizens complained that the removal would cause fuel prices to climb sharply, greatly raising the cost of living. The administration partially overturned the decision but nonetheless enforced a partial subsidy decrease after several days of protests and negotiations. In the wake of the 2012 demonstrations, succeeding administrations worked to reduce government spending on fuel subsidies and restructure the subsidy system. Based on changes in the currency rate and global oil prices, fuel prices were periodically changed. For other industries or fuel types, including diesel and kerosene, fuel subsidies were further cut or occasionally removed. It is vital to remember that the removal of subsidies in Nigeria is still a contentious issue. The advantages, disadvantages, and best practices for managing subsidies in the nation are seen differently by various administrations and interest groups. The current Nigerian government, which is headed by President Bola Tinubu, has chosen to completely remove fuel subsidies. The government should think about implementing the following extensive package of actions in Nigeria to lessen the impact or suffering caused by the removal of the subsidy:
One of such is the implementation of social welfare programmes by creating social safety nets to give vulnerable groups, such as low-income people and families, direct aid. This can be accomplished by raising public primary and secondary schools to the calibre of first-class private schools, which would make sending children to private primary and secondary schools optional; by resuming the distribution of “essential commodities” to civil servants, such as rice, vegetable oil, pasta, seasonings, palm oil, beans, milk, and sugar; and by restoring food subsidies. The government should increase spending on healthcare and education to guarantee that all residents have access to high-quality services. Infrastructure should be improved, healthcare workers should receive training, and education generally should be of a higher quality.
The second is investment in infrastructure development. Infrastructure projects should get a portion of the savings from the withdrawal of subsidies. This will boost economic expansion, provide employment, and enhance living standards nationwide. Pay attention to industries like transportation (mass transit, a reliable rail network, energy production, and affordable housing developments). To offer cheap alternatives to private vehicles, public transit networks should be improved and expanded. This will lessen the impact of higher transportation expenses brought on by the removal of subsidies. Investments in mass transportation systems including buses, trains, and others can increase public mobility while reducing congestion and commuting costs.
The availability of power is a crucial issue because it may replace fuel use, particularly for SMEs and craftspeople. It will greatly minimise reliance on generators for electricity supply if there is a steady and economical supply of electricity for at least 12 to 18 hours each day.
The government should support widespread solar energy production and provide it to employees on a payment plan. By doing this, the strain on transformers will be greatly reduced, and eventually, the distribution of power will increase. To lessen reliance on petroleum imports, make investments in renewable energy sources, including solar, wind, and hydroelectricity. Long-term energy cost reduction, environmental sustainability, and job possibilities in the renewable energy industry can all result from this. Universities, teaching hospitals, polytechnics, and manufacturing enterprises are examples of government institutions that should generate their electricity and lessen their reliance on the national grid.
There should be provision of support for local industries and agriculture. The government should encourage the expansion of regional industries by offering incentives like tax reductions and easy access to loans to increase work possibilities, promote innovation and entrepreneurship. Similarly, make investments in agriculture by helping farmers, enhancing irrigation systems, and encouraging agricultural research and development. As a result, food production will increase, import reliance will decline, and food prices will remain stable. Encourage agricultural schools to develop ways to make some food available all year long.
There is also a need for improvement in fiscal transparency and accountability. The government should ensure that the savings from the withdrawal of subsidies are used wisely and are not the victim of poor management or malfeasance. Implement reliable monitoring systems, carry out routine audits, and encourage openness in public financial management. This will ensure that the monies are allocated properly and assist to increase citizens’ trust.
Effective communication and education of the public is important. The government should launch a comprehensive public education campaign to explain the justification for subsidy withdrawal and the advantages it can have in the long run. It should give the public comprehensive information on the government’s strategies for easing the immediate hardships and aggressively engage the populace to listen to their concerns.
The government must carefully analyse the special difficulties and traits of Nigeria’s economy and society as it plans and implements these policies. By taking a comprehensive strategy, the government may set the stage for long-term economic growth and development while also easing the immediate hardships brought on by the removal of subsidies. And to my fellow Nigerians, it is crucial to keep in mind that while the elimination of subsidies might be difficult, people and communities can manage these changes and strive toward a more resilient and sustainable future by adopting a few coping strategies.
Budgeting and financial planning is one of the coping strategies citizens must take into account. In light of the rising cost of fuel, it is crucial to assess our spending plan and reduce non-essential costs. We should carefully analyse our spending, put the most important things first, and think about saving money for unforeseen expenses.
Exploring other forms of transportation, such as carpooling, taking public transportation, cycling, or short-distance walking will help save money on fuel, which is also good for the environment. If you own a car, use fuel-efficient driving methods, including maintaining a constant speed, cutting down on unneeded idling, and keeping your car in good working order. Fuel efficiency can be increased with appropriate maintenance, such as routine servicing and maintaining properly inflated tires.
Negotiating for telecommuting or flexible work schedules is something you might do if your job permits it. Working from home might cut down on the amount of time and fuel spent commuting each day. If you have access to it, think about employing renewable energy options, such as solar power, to meet your electrical needs. Over time, this can help offset some energy costs and lessen reliance on fossil fuels. Pay attention to how much energy you use at work and home. When not in use, turn off the lights and appliances, and spend your money on energy-efficient appliances to save money over time.
Michael writes via olaleke.alao@ccdiltd.org
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