This article will be brief in addressing the fuel subsidy in Nigeria and hope it will help to clear the issues on ground.
Nigeria is an oil rich nation however that wealth is not as much as people claim it to be based on the production level of under 1.8Million barrels a day with population of around 200 Million people. If you do the maths properly at around 20% profit for crude oil sold at $75 Dollar a barrel, that will amount to around N73 per citizen a day ( 9 US cents), so the idea in social and foreign media that Nigeria is "Super Rich" is wrong and can only aggreviate the already tough situation the country is going through. Nigeria is financially broke and any more subsidy will put the economy in a very bad shape.
Presently, Nigeria spends around N 20 Billion naira a day in subsidizing petrol in a country where basic infrastructure as electricity, roads and rail are seriously lacking. In total Nigeria spends $10 Billion USD for petrol subsidy a year.
Nigeria basically runs a "welfare state", where education to tertiary level is free, electricity tariff is not necessarily cost reflective, it subsidizies petrol fuel, using a huge amount of its export crude oil earning, and uses 97% of its revenue to service its debt alone
The economy can only wake up by taking drastic though very painful decisions, and that is the why the subsidy has to go. Lending agencies have advised the Nigerian Government to take its hands off subsidy, if it still wants to have an economy that exists. The African Development Bank President, who is also a popular Nigeria former Minister of Agriculture, Dr. Adeshina, said in an event a few days before the inauguration of the President that subsidy must go.
What will be the outcome of the subsidy removal in Nigeria and how will the country get out of inflation and a bad economy partly based on subsidy .
- The high price of petrol compared to the subsidized price will cause the smuggled petrol products to become attractive at the borders of other West African countries, who benefit heavily from cheap Nigerian petrol at the detriment of the Nigerian people and Government. Hence the anger of some beneficiaries. We cannot be subsidizing more than what we need and feed other nations with petrol. Smuggling will reduce and become unprofitable by the subsidy removal
- Nigeria imports 66 million litres of petrol a day. Now that is not our real consumption, which may be far less than half the figure quoted. So why do we import so much. First the reason is that the extra quantity goes to the borders and is sold to other African countries who buy it cheaply at the detriment of Nigeria. As subsidy has been removed and smuggling has become less attractive, then the true consumption will show. There will be more need of importing that large amount of crude, as we truly consume less. Only subsidy removal will reveal the true quantity of petrol consumed by Nigerians. Another twist to this figure is that, Nigeria imports less but people hike the quantity on paper so that they will receive subsidy on a higher quoted amount of petrol imported. No matter which is true, subsidy removal will reveal the truth and eliminate lies.
- Nigeria will save or rather stop borrowing N30 billion a day.shockingly using Nigeria's procurement standards, N30 Billion naira a day, can construct 150Km of roads. Just imagine is 30 days of N900 Billion, Nigeria can construct 4,500 Km of road. This complete the worst hit roads across our Nigerian highways. N900 Billion can purchase 2,000MW of gas generators in One month of subsidy savings. I think we should look in this regards.
- Nigeria has 11.8 Million registered cars. 95% of Nigerians do not have cars. so about 195Million Nigerian out of the 200 Million Nigerians, do not drive cars. So the rich and average who can afford some better life than the other 95% are the ones enjoying the subsidy. So how does it affect the poor ones who do not even drive cars. The rest of the population use petrol driven motorcycles, tricycles and commercial cabs and mini-buses. This is where the poor suffer, as there is already a hike in transport fare. The solution to this is been worked out to alleviate the situation, until the economy takes shape.
- With the increase in fuel prices other West African nations will be foreced to source foreign exchange to import their own fuel. This will lead to devaluationof their currency which Nigeria has suffered due to excess petrol import. What this means is that pressure will reduce a bit on the dollar available in the country and then the dollar value will fall or reduce
- With the emergence of the Dangote refinery, Nigeria will be a giant producer of refined crude oil and this will mean that importation will almost or will seize. Port Harcourt and Warri refinery are in top gear maintenance by Daewoo as part of the companies handling the project. BUA Group will commence soon with the construction of its 200,000 barrels a day Refinery in Akwa-Ibom state. With Dangote refinery alone, Nigeria will save $7 to $11 Billion Dollars used for importation of refined crude oil products. Petroleum product import alone stands at 34% of our total import bill. This means that we spend a huge amount based on petrol import alone. with this reduction on the demand on the dollar and continuous restriction on the import item list (especially agricultural products), the dollar rate will drop and life will become better with this. Very importantly, this will also mean that the cost of petrol in Nigeria, will drop, since the price for dollar has dropped locally. Dangote will but crude at dollars and refine, that way as the naira becomes stronger or as the dollar depreciates against the Naira, then the cost of refined crude purchase will reduce, and the pump price of petrol will drop from N533 to may be around N350 to N400 per litre. It could perhaps be les.
- Other West African and other African countries, will be forced to buy all crude products from Dangote refinery, thereby increasing revenue to the refinery, Government benefits by receiving higher tax revenue to Federal Government and increase in taxes and revenues to Lagos State.
- By the grace of God and firm hard work, this will be achievable. Let's trust God and do part. What we will need next, is to channel extra resources into agiculture and stop wasting around another $2 to $4 billion USD importing food like , Palm-oil, Rice, Corn, Wheat, Soya Bean, Tooth-pick, Pencils etc.
- Nigeria will come out of this challenges and become an icon and an exemplary leading nation of the world
