The current price of gasoline is 165 Naira per liter.
The potential price of gasoline after subsidy can range from 320 to 340 naira per liter according to Malam Mele Kyari, general manager of the group and general manager of the Nigerian National Petroleum Company Limited.
How will Nigerians react to a 100% price hike at the pump? As the cost of road trips will rise, Uber and other driver calling apps will increase their fares to match the potential price at the pump. Inflation will rise another 2 to 5%. Goods and services will become more expensive as businesses adjust to prices at the pump.
But don’t worry, the federal government is preparing a package to protect poor Nigerians from this price hike. According to Zainab Ahmed, Minister of Finance, Budget and National Planning, between 30 and 40 million poor Nigerians will benefit from a transport subsidy intervention of 5,000 naira per month.
So 5,000 naira for 40 million poor Nigerians would equal 200 billion naira per month and 2,400 billion naira for 12 months – the maximum period for which the minister said the transport subsidy could last.
To note: Earlier this year, the cost of premium alcohol subsidies (PMS) according to NNPC GMD, Mele Kyari was between 140 and 150 billion naira per month.
So why are subsidies removed if they are to be replaced by subsidies that will not benefit more than half of the entire population? Because there has been pressure from international organizations (IMF and World Bank), experts and state governors to end the subsidy program and deploy resources in other sectors such as health, l education and infrastructure.
Does the transportation subsidy fall into any of these areas? Apparently not.
The transport subsidy is always in the same bracket of socialism with subsidies. Same objective. Same social contract to protect people from high fuel prices.
In addition, the Minister of Finance also expressed his concerns about the inclusion of these 40 million Nigerian “poor” in the intervention program. Bank verification, national identification registration, etc.
So it appears that the intervention is a rudimentary idea to pacify the unions that would automatically oppose and react to the removal of subsidies – who, in their jurisdiction, are obligated to protect Nigerians.
Another grouse with this development is what is happening to other Nigerians? Are they now using the lives of Americans who pray that oil prices don’t go up so they can take advantage of cheaper fuel? But wouldn’t that be misleading given that Nigeria relies on high oil prices to finance the majority of its budget and 90% of its foreign revenues?
In addition to the finance minister’s plans for life after the subsidies, Zainab Ahmed also said the government is planning and deploying compressed natural gas (CNG), which is an alternative mass transit fuel to PMS.
An ideal situation to transition to post-grant life should have been an infrastructure set up with cheaper buses and other means that every Nigerian can use. A gradual transition from subsidies where the cost of living has improved significantly relative to the cost of fuel prices. It should be phased – not a sudden withdrawal.
The government should also put in place a mechanism to put down oil companies or traders who would like to take advantage of the situation and inflate prices in the name of “exchange rate, distribution costs, freight costs, landing costs. and other “costs”.
Recently, United States President Joe Biden asked the Federal Trade Commission to examine oil and gas companies and their role in driving up gasoline prices, citing “potential illegal conduct.” A similar scenario could occur in Nigeria. The government needs to be prepared because the historical track record proves that marketers can play a reprehensible role.
The removal of fuel subsidies is an important step towards the economic and social development of Nigeria. In practice, Nigeria is one of the cheapest countries in the world to buy fuel and that is why people smuggle fuel to neighboring countries to sell it at higher prices for profit. round trip.
Over the years, the subsidies have imposed enormous costs on the country. In a particular month recently, Nigeria spent 150 billion naira to subsidize gasoline. Using data obtained from Tracka.ng, a community of active citizens who track the implementation of government projects in Nigeria – the average cost spent on health centers, skills training centers and school blocks ranges from 50 million naira and above. At that price, the cost of that particular month’s grant could fund 3,000 of these types of projects.
In truth, subsidies should have been phased out long ago and with the development and construction of private and public refineries coming into play in the next few years, Nigerians will have to hang on to the “short-term” drawbacks.
The jury is still out on whether fuel would be cheaper when refineries such as Dangote’s come into play. But with the 2023 election taking place after next year, it is possible that politics will delay the removal of subsidies. . No government would want to hold the marred record of “340 N per 1 liter” as this has been a focal point for campaigns over the years alongside promises of the Naira-Dollar exchange rate.
Hopefully the Energy Information Administration (EIA) expects the price of Brent oil to fall from an average of US $ 84 per barrel in October 2021 to US $ 66 per barrel in December 2022, fingers crossed for that the price at the pump is not too hard for Nigerians without “transport allowance”.