Fuel Subsidy Removal in Nigeria: A “Mission Impossible”?

By Chinwe Ekene Ezeigbo

The recent pandemonium caused by the fuel subsidy removal has led me to seek to really understand how subsidy works and the economic import.I have studied some literature on this issue and (still studying) the various issues which have been played out by the proponents and opponents of the subject matter.

It is an established fact that subsidies are a form of aid introduced by the Government in most cases to prevent the decline of the industry which is being subsidised. When issues like this hit people below the belt it is usually difficult to give a rational thought to it- what with the attendant inflation in every sector. While the concerns of the Nigerians are “justified” in a sense, it doesn’t remove the fact that the action of the Government would, in a utopian regime, be a step in the right direction.

This is so mostly because the money pumped into this industry could be used to build other industries.

Proponents of this policy advise that the short term effect of the removal would be arduous on the populace but not permanent and that this step would reduce the corruption in the downstream sector, while also reducing the amount of debts accrued through foreign donor support with positive implications for the non-oil economy. On the flip side, opponents suggest that it would be foolhardy to trust a government perpetually burdened with the curse of corruption, where there are no guarantees that the Government would keep to their word to plunge the funds for subsidy into other sectors.

Considering the great hardship which the removal of the subsidy will and so far has unleashed on the masses, especially the proletariats- as they are sometimes labelled, I would say: removal of the fuel subsidy is a good policy made at a bad time. Now, it really has not been established at what point this subvention should be removed or withdrawn in the first place, but my guess is that it would be fool hardy to start a project without the intention of completing it or in this case to offer a subsidy for the purpose of helping alleviate a problem without making provisions to cushion the effect of that problem before removing the said subsidy.There are so many issues that have to be addressed before a subsidy can be removed, refineries have to be built and infrastructure put in place. There should be plans in place to make the short term effect in actual fact- short term. For Nigeria, at this point, with no infrastructure in place, the projected short term effect would possibly stretch to a longer term. If this policy is to stand, there has to be a compromise, because from all indications, it is not a welcome development.

The catch is- when would it be the right time for subsidy removal in Nigeria? It is a good example of a situation where we are damned if the policy is removed at this stage and damned if we don’t- Which is the lesser evil to choose from? There has to be a middle ground- which I am yet to think of. Would removing part of the subsidy and gradually easing the people into the policy while also building infrastructures desperately needed at this stage be a better option? Is this then a mission impossible? What a conundrum!