Lies, damned lies about fuel subsidy removal in Nigeria, by Olu Fasan

For decades, removing the petroleum subsidy in Nigeria was a political hot potato and then a political football. The first metaphor refers to the squeamishness of some past governments about removing the subsidy. The second describes self-interested and hypocritical politicians whose presidential ambitions led them to be Janus-faced on subsidy removal.

In 2012, Bola Tinubu viscerally opposed removing the fuel subsidy, only to remove it on his first day as president in 2023. Atiku Abubakar’s support for fuel subsidy removal was as solid as the Rock of Gibraltar. But recently, he did a remarkable U-turn!

In societies where impact assessments are central to policymaking, whether to remove the subsidy would depend on adequate consideration of alternative options, the adverse consequences of withdrawal and sufficient mitigation. But President Tinubu’s abrupt removal of the subsidy on his inauguration bore no hallmarks of such detailed preparation. Indeed, he later said: “When I got to the podium, I was possessed with courage, and I said, ‘Subsidy is gone.’” Thus, he acted on impulse.

Unfortunately, the narrative about the fuel subsidy removal is defined by deception, half-truths and outright lies. For a riposte, let’s return to basics. The fuel subsidy was introduced in the 1970s as an imperative.

Because Nigeria could not refine its crude, despite having state-owned refineries, it had to import refined petroleum. But the costs of imported refined petroleum are determined by world crude prices and the naira’s exchange rate. So, with high world oil prices and a devalued naira, the landing costs of imported refined petroleum were very high, as was, by extension, the price citizens paid for petrol.

Thus, to relieve Nigerians of an unbearable burden, the government sold imported refined products to the public at below-market prices, that is, at subsidised prices. That’s the genesis of the fuel subsidy. But the chain of causation is important: Nigeria’s failure to refine its crude led to its reliance on imported refined petroleum; its reliance on imported refined products, when combined with high world oil prices and the naira’s devaluation, led to high costs of imported refined petroleum and, by implication, a high pump price for petrol.