Gowon, Obasanjo’s Legacy: How They Introduced Nigeria’s Fuel Subsidy System

The origins of Nigeria’s controversial fuel subsidy system have been traced to the administrations of former military Heads of State, General Yakubu Gowon and General Olusegun Obasanjo, according to the Independent Media and Policy Initiative (IMPI).

IMPI has claimed that the subsidy was introduced during a period of economic prosperity as a short-term measure to address rising global oil prices caused by the actions of the Organization of Petroleum Exporting Countries (OPEC). The chairman of IMPI, Niyi Akinsiju, highlighted this in a recent briefing to journalists in Abuja.

Akinsiju explained that while the fuel subsidy was initially intended as a temporary fiscal response, it has persisted over the decades, leading to economic distortions. He noted that the subsidy was supposed to be discontinued during periods of economic downturn, but political and social pressures have prevented this from happening.

The IMPI chairman also expressed concerns about the backlash from labor unions over the recent removal of the subsidy by the current government, pointing out that many Nigerians had long called for its removal, especially in the lead-up to 2023.

Historically, both Gowon and Obasanjo presided over fuel price hikes in response to economic conditions. Under Gowon, the price of petrol rose by 40%, from six kobo per liter to nine kobo. During Obasanjo’s time, the price saw a further increase of 70%, jumping from nine kobo per liter to 15.3 kobo.

Akinsiju emphasized that Obasanjo formalized the subsidy regime into law by including petroleum among the products for which the government was responsible for setting prices. This move was aimed at cushioning the effects of the international oil price spike on the domestic economy. However, despite its temporary intention, the policy has become a permanent feature of Nigeria’s economic landscape.

“Under both Gowon and Obasanjo, the price of petrol increased in line with economic realities,” Akinsiju said. “The subsidy was introduced as a mechanism for redistributing the country’s wealth during times of high revenue earnings. But when economic conditions worsened, the logical course was to halt the subsidy. Unfortunately, this did not happen, and now, the subsidy and the Nigerian people are like economic Siamese twins.”

He further noted that every government attempt to remove the subsidy since 1988 has been met with strong opposition, often leading to public uproar and protests, despite significant changes in the economic factors that justified its initial introduction.

Akinsiju criticized the ongoing protests led by the Nigeria Labour Congress (NLC), arguing that the labor unions have taken their traditional stance of blaming the government for fuel price increases. “As a body of analysts, we submit that this kind of trouble-mongering should cease,” he stated.