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The Debate Over Fuel Subsidy in Nigeria

The Nigerian government has been at the center of a contentious debate over the existence of fuel subsidies. While the government insists that subsidies have not been reintroduced, some industry stakeholders express concerns to the contrary. Among those who believe subsidies are back is the National President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Usifo.

Usifo recently argued in a television interview that the government had to resume subsidy payments to prevent further increases in the already high petrol pump prices. He attributed the rising fuel costs to increasing global crude oil prices and the depreciation of the Nigerian currency. For context, when President Bola Tinubu took office on May 29, 2023, the average daily price of Brent Crude oil was around $75.47 per barrel. Presently, it has climbed close to $90 per barrel.

The issue of fuel subsidies has been a long-standing problem in Nigeria. Previous administrations have made attempts to remove the subsidy, only to revert to paying even more. For instance, in July 2016, former President Muhammadu Buhari raised the petrol pump price from N87 to N145 per liter, claiming it was a subsidy removal. However, the price continued to rise, reaching N160 and ultimately N180 per liter before Buhari left office in 2023.

UPDATE: Fuel Subsidy Swallowed $10bn In 2022 Alone – Shettima

The root of the problem, many argue, is the lack of adequate preparation for a successful and less painful subsidy removal. Organized labor and concerned Nigerians have consistently contended that before total subsidy removal can be effective, Nigeria must restore its domestic refining capacity. Additionally, the production of petroleum products should be subsidized through a special allocation of crude oil to all refineries for domestic consumption.

As long as Nigeria relies on imports for refined petroleum products, subsidies will continue because the country lacks control over international market prices. The urgent completion of all refineries, including private ones, is seen as a matter of national economic interest. Ensuring the supply of crude to all refineries without discrimination is crucial to ending the subsidy conundrum that has plagued the country for years.

The issue of fuel subsidies remains a hotly debated topic in Nigeria, with some stakeholders believing that a more strategic approach, such as reviving domestic refining capacity, is essential to achieving a sustainable solution.

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