By: Ebisan Petra Wilkie
In 2020, Nigeria’s fuel subsidy cost the country more than 8 billion dollars, and it is expected to be higher in 2021 because the country hasn’t set a viable plan that will transfer the money to other sustainable needs. The total amount paid for fuel subsidy does not even take into account the country’s losses due to market alterations as a result of the subsidy. If Nigeria’s government can implement transparent and concise reforms, the funds from the fuel subsidy program could be put to greater use.
Nigeria is one of the world’s largest oil producers. However, the country’s mineral resources have not yielded any critical enhancement in the quality of life for the majority of Nigerian citizens – 54 percent live below the poverty line. In 2010, Nigeria received 59 billion dollars from oil exports. So, the country does not lack the resources to reach its development goals. Instead, its resources have been utilised inefficiently.
To succeed, the government has to take on another challenge – transparency in the use of more than 8 billion dollars fuel subsidy funds. The government must utilise these resources more efficiently to create social welfare and infrastructure improvement programs that will improve the quality of life of poor Nigerians and put the country on track to meet its development goals. Nigeria’s fuel subsidy continues to congest other developmental expenses.
By comparison, Nigeria’s total allocation for education is about 2.4 billion dollars, and it’s not much higher for health care. Infant mortality in Nigeria remains unacceptably high at 90.5 per 1000 live births. There is no doubt that there have been low paved roads in the country for a prolonged time. The 8 billion dollars from fuel subsidy could help to address some of these issues.
Also, keeping the domestic oil price low with fuel subsidy has discouraged additional investment in Nigeria’s oil sector. Since 2000, Nigeria has issued at least 20 refinery licenses to private companies. However, not one refinery has been built because investors could not recover their investments under the artificially low price structure.
On the contrary, the rich people and not the poor benefit from Nigeria’s fuel subsidy. With the government subsidising the market to keep domestic fuel prices artificially low, those who consume the most have more significant benefits from the subsidy. Poor Nigerians rely primarily on public transportation. As a result, their per capita fuel consumption is significantly less than the rich ones, who generally use private vehicles.
Nigerian workers are hurt, and their livelihoods are in danger with the doubling of petrol prices. They want to know that the government has a credible plan, and they represent a shout for the government to implement post-subsidy programs quickly. Some form of social protection must be launched immediately by the government to protect the most vulnerable. Social protection could include measures to reduce the cost of public transportation in the future.
The Nigerian government must implement a transparent system for monitoring and redirecting funds from the fuel subsidy program that will go into infrastructure, support for small businesses and safety net programs. The government should assemble a committee of critical civil society organisations to oversee the investment of these funds. Unlike the fuel subsidy itself, these programs should be targeted toward improving the standard of living of the poor and providing an enabling society where private enterprises can thrive without intrusive governmental presence.
The government should implement complete fuel subsidy removal. If successfully implemented, it will create room for Nigeria to develop refinery capacity, increase its potential revenue from the oil market, and create more job opportunities. Organisations should discuss how best to redirect the funding from the subsidy program, while the government should speak to the masses sincerely about its actions and plans.
Ebisan Wilkie is a writing fellow at African Liberty. She tweets via @Pet165.
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