By Obinna Ejianya (9News Nigeria – Melbourne, Australia)
President Tinubu’s decision to remove the fuel subsidy has had far-reaching consequences for Nigeria’s economy and its citizens. While the removal may be justified in the long term as a necessary step to wean Nigeria off its reliance on subsidies, the short-term effects have been disastrous. The quadrupling of fuel prices has led to rampant inflation, worsening poverty, and severe hardship for millions of Nigerians who depend on fuel for daily activities.
On May 29, 2023, during his inauguration as the President of Nigeria, Bola Ahmed Tinubu announced the immediate removal of the long-standing fuel subsidy. This decision, made on his first day in office, led to an unprecedented hike in fuel prices, quadrupling from official pump price of ₦185 per liter to nearly ₦600 in some regions before pseudo scarcity forced the pump price to border around 950 to 1,000 Naira a litre depending on your location in Nigeria. The sudden rise in fuel prices severely impacted the Nigerian economy, plunging millions into hardship. Given Tinubu’s close ties to Oando PLC, a major player in the oil industry, and speculation about the company’s operations in the Middle East, many have questioned the motivation behind the subsidy removal and the refusal to implement policies that could lower fuel prices.
The Fuel Subsidy Debate: A Double-Edged Sword
Fuel subsidies in Nigeria had long been a contentious issue. Established to keep fuel prices affordable, they also became a significant drain on the national budget, with funds often misappropriated or lost to corruption. By 2023, international organizations like the International Monetary Fund (IMF) and the World Bank called for the subsidy’s removal, arguing it was fiscally unsustainable.
However, the timing of Tinubu’s decision, coupled with his family’s links to Oando PLC, raised eyebrows. Wale Tinubu, the CEO of Oando, has been a key figure in Nigeria’s oil and gas sector for decades. Critics claim that the removal of the subsidy, which effectively increased fuel prices, may have benefited Oando and other oil marketers, as they were able to sell fuel at higher market rates without government intervention.
Despite public outcry over the hike, Tinubu’s government has remained adamant, citing the need for Nigeria to end its dependence on subsidies. Yet, his refusal to implement policies that could mitigate the economic impact of rising fuel prices has drawn sharp criticism. The quadrupling of fuel costs has led to increased transportation costs, skyrocketing food prices, and surges in the cost of goods and services. The immediate effect of this hike has been widespread inflation, further exacerbating the already dire economic situation.
Impact of Fuel Price Hikes on the Nigerian Economy
Nigeria’s economy is heavily reliant on fuel, as it powers the vast majority of production, transportation, and logistics. Due to chronic power shortages, most businesses and households depend on petrol or diesel-powered generators for electricity, further increasing their reliance on fuel. The immediate removal of the subsidy and subsequent price hikes resulted in cascading inflation across key sectors. Transportation costs surged by more than 200%, with food prices following suit due to the higher cost of distribution. The increased cost of living has placed millions of Nigerians below the poverty line, with many struggling to afford basic necessities.
The hardship was compounded by Nigeria’s epileptic electricity supply, which forces industries and households to rely on fuel for power generation. Without stable electricity, the cost of production skyrocketed, further increasing the prices of goods and services. This scenario severely weakened an already fragile economy, dependent on imports and facing mounting external debt.
Tinubu’s Reluctance to Lower Fuel Prices
Despite the economic turmoil caused by the high cost of fuel, President Tinubu’s administration has been reluctant to introduce policies that could alleviate the situation. His government has offered little in terms of fuel price regulation or subsidies to reduce the financial burden on citizens. One explanation for this steadfastness may be the administration’s focus on attracting foreign investment by presenting Nigeria as a market-driven economy free from state interference.
Tinubu’s government has insisted that the removal of the fuel subsidy is necessary for Nigeria to build a sustainable economy. The logic behind this argument is that the country can no longer afford the $7.5 billion spent annually on subsidising petrol, an amount that equals 3% of Nigeria’s Gross Domestic Product (GDP). Tinubu’s administration has suggested that the funds saved from subsidies would be redirected to critical infrastructure projects. However, the short-term consequences of this policy have been devastating for millions of Nigerians, who have seen their purchasing power eroded due to inflation.
Despite the hardship, Tinubu’s administration has not demonstrated a concerted effort to mitigate the fuel price increase. There has been little attempt to improve the power generation plants, invest in alternative energy sources such as renewable energy using local human and mineral resources or repairing Nigeria’s ailing refineries, which would reduce dependence on imported refined fuel. Even the much-anticipated Dangote Refinery, touted as a potential solution to Nigeria’s refining crisis, after being plagued by delays and setbacks, did not provide any solution to the problem inflicted by fuel price hike, owing to the fact that the Dangote’s fuel is selling almost higher than the so called imported fuel. The situation is leaving Nigerians at a perilous edge, due to the government’s adamancy to come to the aid of the dying poor Nigerians.
Critical Analysis: The Government’s Incoherent Claims on Fuel Subsidy Removal
Despite the rhetoric surrounding the removal of fuel subsidies and its purported aim of saving billions for governmental use in infrastructure development, a troubling situation has emerged. The Nigerian National Petroleum Corporation (NNPC), the government entity responsible for oil transactions, has declared that it is facing financial strain due to costly fuel imports, leaving it indebted to fuel importers. Reports investigated by 9News Nigeria indicate that the NNPC owes an alarming $6 billion to these marketers, highlighting a significant lack of transparency on the part of the government.
In a public statement, Bayo Onanuga, the Special Adviser to the President on Information and Strategy, defended the Federal Government, stating, “The NNPC cried out recently because it can no longer sustain the price differential on its balance sheet without becoming insolvent. The situation has greater implications for the ability of the three tiers of government to function, as the NNPC has failed to pay into the Federation Account the money that should go to the government.”
Onanuga confirmed that the NNPC Limited is indeed owing $6 billion to oil traders. This raises a critical question: If the Federal Government has truly been saving money by eliminating fuel subsidies for impoverished Nigerians, where are the billions that should be accumulating from the exorbitant fuel prices that citizens are paying to power their generators, both domestically and commercially? Who is deceiving whom?
According to data obtained by 9News Nigeria, Nigeria’s domestic petrol consumption is approximately 66.7 million liters per day. With the fuel price set at 950 Naira per liter, the daily cost of fuel for Nigerians amounts to about 63.3 billion Naira. This indicates that Tinubu’s government is saving 49.6 billion Naira compared to the 206 Naira per liter charged in 2023, before the fuel subsidy removal began on May 29, 2023. Over the 490 days since assuming office, Tinubu’s government would have saved about 24.4 trillion Naira ($14.8 billion) from the removal of the fuel subsidy. The Big Question now is “Where is this money, and why is the NNPC still indebted to fuel importers?” It suggests that the corruption associated with fuel subsidies has merely taken on new and more insidious forms, thereby appearing in a garb of a masquerade.
Nigerian government should be supposedly making effective $14.8 billion from the pockets of citizens who are struggling to afford fuel for both domestic and commercial use. How can the NNPC owe $6 billion to importers if not due to rampant corruption siphoning off these funds?
Simple Calculations
- Daily Domestic Consumption: Approximately 66,700,000 liters (Sixty-six million, seven hundred thousand) per day.
Fuel Price Context
- Before Tinubu’s Regime:
- Fuel Price: 206 Naira per liter.
- Daily Cost of Fuel Consumption: 66,700,000×206=13,740,200,000 Naira
- Total Amount Nigerians Spent on fuel on daily basis: 13,740,200,000 Naira (Thirteen billion, seven hundred and forty million, two hundred thousand Naira) per day.
- During Tinubu’s Regime:
- Fuel Price: 950 Naira per liter.
- Daily Cost of Fuel Consumption: 66,700,000×950=63,365,000,000 Naira
- Total Amount Nigerians spent on fuel on daily basis: 63,365,000,000 Naira (Sixty-three billion, three hundred and sixty-five million Naira) per day.
Financial Implications of Subsidy Removal
To understand how much Tinubu’s government has gained from the subsidy removal, we analyze the daily cost of consumption since Tinubu’s removal of subsidy: ₦63,365,000,000 minus the daily cost of consumption before Tinubu’s removal of subsidy ₦13,740,200,000 = ₦49,624,800,000 (Saved from subsidy removal)
This indicates that Tinubu’s government is effectively saving ₦49,624,800,000 (Forty-nine billion, six hundred twenty-four million, eight hundred thousand Naira) each day at the expense of Nigerians.
This denotes that from May 29, 2023, to September 30, 2024—a span of 490 days—Tinubu’s government has saved approximately: ₦49,624,800,000 daily savings from subsidy removal×490 days=₦24,352,752,000,000
This totals ₦24,352,752,000,000 (Twenty-four trillion, three hundred and fifty-two billion, seven hundred and fifty-two million Naira).
Conversion to USD
If the Nigerian government is indeed saving money from the removal of the fuel subsidy, we can convert the total savings to USD using the current CBN official exchange rate of 1,638 Naira to 1 USD: ₦24,352,752,000,000÷₦1,638 = $US 14,867,124,000
This results in approximately US$14,867,124,000 (Fourteen billion, eight hundred sixty-seven million, one hundred twenty-four thousand USD).
The substantial savings claimed by the government from the removal of the fuel subsidy raise critical questions about its true intentions and the implications for the Nigerian populace. If these savings are genuine, they should be transparently reinvested into initiatives that benefit the citizens rather than simply increasing government revenue, which appears to be diverted into personal channels.
Oando
Oando’s Middle East Ties and Favorable Deals
Oando PLC, which has benefitted significantly from the deregulation of Nigeria’s oil sector, has expanded its operations beyond Nigeria. The company’s dealings in the Middle East, particularly in Malta, have come under scrutiny, as rumors circulated about its involvement in the importation of adulterated fuel. However, Oando has strongly denied these allegations, asserting that it adheres to the highest industry standards.
In addition, Oando’s acquisition of AGIP’s onshore assets from Italian energy giant ENI, which received accelerated approval from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) under Tinubu’s administration, further fueled suspicions of preferential treatment. This deal, completed within months, contrasted sharply with the delays faced by other oil companies, suggesting that Oando’s ties to the presidency may have played a role in securing the transaction.
Policy, Politics, and Profit
Tinubu’s reluctance to implement policies that could lower fuel prices, despite the evident suffering, raises concerns about the role of vested interests in his administration’s economic policies. Oando PLC, under the leadership of his nephew Wale Tinubu, continues to thrive amid deregulation, benefiting from favorable government deals and a higher market for fuel prices. Whether Tinubu’s policies are purely economic or driven by personal interests remains a subject of intense debate, but the consequences for Nigeria’s citizens are clear: higher prices, more hardship, and an uncertain future.
By Obinna Ejianya (9News Nigeria – Melbourne, Australia)
