The Reality Of Removal & Return Of Fuel Subsidies in Nigeria: A Closer Look

Research has shed light on the intricate dynamics surrounding the removal and return of fuel subsidies in Nigeria. Despite official claims by the Nigerian government of subsidy removal, evidence suggests that it has covertly reinstated the practice in recent times. Reports indicate that in August, the federal government allocated over 160 billion naira to stabilize the petrol price at 620 naira per liter.

This move by the government comes amidst the backdrop of escalating global crude oil prices and the devaluation of the Nigerian naira. Many experts suspect that the government is discreetly subsidizing fuel to gauge public sentiment and alleviate mounting pressure.

The decision to stabilize fuel prices while global crude oil prices are on the rise has led economists to question the actual removal of government subsidies, which President Bola Ahmed Tinubu had announced in May. According to the government, the market has been left to regulate itself since that announcement.

Adding to the suspicion is the revelation of substantial government spending to control fuel prices during this period. Experts believe several factors have led to this apparent policy reversal.

In an interview with the BBC Hausa, gathered by The Spectacles, Dr. Ahmed Adamu, a petroleum economist at Nile University in Abuja, likened the situation as a monkey resembles a human. He pointed out that all indicators in Nigeria, including the cost of crude oil on the global market and currency devaluation, should naturally drive fuel prices upward.

Dr. Adamu emphasized that since most transactions are conducted in dollars, the depreciation of the naira should inherently increase fuel prices. However, the lack of such an increase suggests a return to fuel subsidies, despite the Nigerian oil company’s silence on the matter.

Conversely, oil dealers, who traditionally benefit from subsidies, claim that the government is not providing any subsidies. The chairman of the Arewa Oil and Gas Marketers Association, Alhaji Bashir Dan-mallam, argued that the fluctuating dollar exchange rate doesn’t significantly affect the NNPCL company, which directly imports Nigerian oil. Oil dealers procure dollars from the parallel market, allowing them to maintain fuel prices without government subsidies.

Dr. Ahmed Adamu expressed little surprise at the government’s reversal, highlighting past instances when the government removed fuel subsidies without addressing underlying issues, such as reducing dollar demand and stabilizing the naira’s value.

In late June, anxiety among Nigerians intensified as rumors circulated about a potential fuel price hike following the cessation of government support. This situation raised concerns about the cost of living, compounding the already challenging economic conditions faced by citizens before subsidy removal.