Beyond Palliatives: Unraveling the Complexities of Nigeria’s Current Crisis; Reintroducing Subsidy and Finding a Way Forward

….by Abíọ́lá Adégboyègá Kọ́láwọ́lé, Esq.

I totally disagree with the Director-General of NOA, Lanre Issa-Onilu, who made a statement on Channels Television’s Sunrise daily that “Poverty will worsen if Petrol Subsidy Returns”. He didn’t make any analysis to prove his point, so how are we supposed to believe what he has said or take it seriously? Let us be sincere with ourselves, let’s tell ourselves the truth. Nigerians cannot pay the market reflective cost of petrol; it is never static.

On the topic of giving palliatives to citizens, this is merely a reactionary measure; it doesn’t help as a long-term solution. How long are we supposed to continue on this palliative terrain? I totally disagree with such an idea because it has been ineffective, and I don’t see it being effective in the nearest future. We must understand that the trust deficit between leaders and followers. Frankly, we are very corrupt in this part of the world. The chain of movement of such resources has always been the issue because it doesn’t get to the targeted persons. History is always a good teacher, so let me ask you what have you ever gotten from any government in Nigeria? If we are talking about reliefs, palliatives… Of course, President Tinubu has done his possible best in the disbursement of these items to the State Government to ameliorate the present inflation issue, but it is merely a reactionary measure which he has been doing since he got into power with the dollar and petrol. I have not gotten any palliative, and sincerely, what palliatives can I be given that will solve my problems? I guess we are being realistic? So let me complete that reality with my own situation. Three days ago, I bought fuel for N52,000 at the rate of 617 naira at NNPC petrol station after queuing for about one hour thirty minutes. It raises the question of how long will that fuel last and how much is my salary? I am a lawyer working in a private law firm, and none of my colleagues have also gotten anything to ameliorate the issue we are currently having. I have paid for the annual NBA conference, which skyrocketed from N20,000 to N50,000, but I am scared to go to Lagos for the conference due to the fear of the unseen. In Nigeria, you are one emergency from being very poor without help from anywhere. I am sure you understand my point. As I said earlier, we must understand that the trust deficit between leaders and followers in the country due to repeated cases of broken promises over the years.

On the 31st day of July, 2023, Dele Alake, President Tinubu’s special adviser on communication and strategy, said that the President approved the provision of buses to students of tertiary institutions across the country to “ease the burden of the fuel subsidy removal” on them. The President promised to put out measures, including CNG-powered mass transit buses and tricycles, to cushion the impacts of the subsidy removal. Onanuga’s statement said the Federal Government is targeting the purchase of 5,500 CNG vehicles (buses and tricycles), 100 Electric buses, and over 20,000 CNG conversion kits, alongside spurring the development of CNG refilling stations and electric charging stations”. Nigerians are yet to witness the fulfillment of any of the aforementioned promises till date; it is over a year.

In my objective analysis of this issue, I will relay my opinion on what should have been the solution to the current crisis, the available solution, and the alternative.
What should have been the solution: The best situation for Nigeria is where we are producing petrol, such that we can get the price to reflect the local labor or cost, but we are far from that now; this is what should have been the solution. There has been effort by different administrations to bring back the Nigerian refineries, but this has been unsuccessful. Nigerians can’t wait for the refineries to work at full capacity; I honestly don’t think they will do well. Money assigned for turnaround maintenance simply vanishes in the air, and the refineries are left unattended to. According to Punch Newspaper, In 2021, specifically, the Federal Executive Council approved $1.5 billion for the turn-around maintenance of the Port Harcourt Refinery. Yet, this investment has not yielded significant returns. If certain people have been charged with overseeing the rehabilitation of our refineries, oil production, distribution and production data, and they have failed woefully, why has the President left them in the helm of affairs?! How are we supposed to hope for anything good from the refineries owned by Nigeria? Have we, as a nation, received a worthwhile return on our investment in the development of these refineries? I’ll leave that for you to ponder and answer.

The immediate available solution:
The available solution is not pretty, but what I am after is a one-stop solution that takes care of all the problems at once. A solution that all Nigerians can benefit from at the same time is the reintroduction of subsidy. I agree that subsidizing fuel has led us into subsidizing waste and theft. The process was deeply affected with corruption and leakages. My opinion is that the process of subsidy should be considered as much as the policy of subsidy. The Nigerian government has been tiptoeing around this issue due to the problems of corruption in the system of subsidy as a whole.
According to Michael Oluwagbemi, a renowned energy expert, Nigeria saved 25%-40% on fuel subsidies when border policing was tightened, as stated in his interview on TVC station four years ago (2020). It is the process and not the idea of subsidy that should be a problem.

Should we subsidize consumption or production? Many have made arguments on subsidizing production, but I share a different opinion. Subsidizing production will mean the government has to find particular individuals that will benefit from the subsidy; their argument against subsidizing consumption is that the elites with 4 and more cars in the society will benefit more from from it, so what?! Subsidizing consumption helps everyone, as we have always claimed to be equal; it is my opinion that Nigeria sticks by it. My concern is why the government is acting like the issue of subsidy should not even be mentioned when very advanced countries subsidize petrol.
According to The U.S. Energy Information Administration (EIA) , In 2023, the U.S. extracted and produced about 12.8 million barrels of crude oil per day on average in 2023. This production comes primarily from states like Texas, North Dakota, New Mexico, and offshore drilling in the Gulf of Mexico.
In 2022, fossil fuel subsidies in the United States totaled $757 billion, according to the International Monetary Fund. So, why is the Nigerian government acting like subsidy is a diabolical thing we shouldn’t even mention? We are not better than the USA that has fuel and still subsidizes it for its citizens.

The US spends approximately $1 billion annually on sugar subsidies and spends billions of dollars on subsidizing Corn for Ethanol Production, Catfish Farming, Sports Stadiums, Agricultural Subsidies, and Cheese Storage. I am sure we cannot pretend to be better than the US; I used the aforementioned country as an example because just like Nigeria, they have crude oil, extract and produce but still pay subsidy for the same product. Shifting our focus to Africa, let’s consider Egypt as a pertinent example. In response to the global inflationary wave and high exchange rates, the Egyptian government has taken proactive measures. For the 2023/24 fiscal year, they allocated EGP 119.42 billion for fuel subsidies, representing a substantial 326% increase from the previous year, according to the website of Egypt Oil & Gas Research Analysis. Interestingly, Egypt boasts 12 operational refineries, with a combined capacity of 833,000 barrels per calendar day as of 2022, according to the website of Statista.
You see, that is where I have a serious argument against that of Mr. President.
The two vital issues that led to the removal of subsidy: 1. We spend too much money on subsidy that it affects the government’s implementation of some policies and affects the execution of important infrastructure. 2. The corruption in the system of subsidy. With all due respect to Mr. President, looking at number 2, it will be very insincere and inconsiderate for us to hold the said view forever. This is because Mr. President has been in politics for 3 decades; if anyone should have a solution to the corruption in the system of subsidy, it should be Mr. President. In reality, the country is punishing the citizens due to the corrupt practices of those citizens that are not up to 1% of the population of the country. Instead of giving out these funds to cushion the economic situation of the country, why not subsidize fuel since it affects all Nigerians? Please, let’s stop talking about subsidy like it is one diabolical curse that has restricted the growth of Nigeria because it’s far from it.

Alternative Solution: The need to find a fine balance between the issue of removal or non-removal of subsidy might just fall into the discussion of Dangote refinery. I made a tweet about the Dangote refinery and how it would help us from the fuel subsidy debacle. Dangote’s refinery is in a position to help Nigeria, but the government has to have Nigerians at heart in order for this to happen. This is the immediate solution to the current crisis faced by Nigerians. Giving Dangote the required feeds will eliminate the high cost of fuel, and in turn, there would be no need for subsidy. Dangote refinery should have a tremendous impact across the value chain:

1. Elimination of landing cost.
2. It will eliminate the cost of buying petroleum products.
3. Eliminating the cost of transportation.
4. Eliminating the cost of logistics.
5. Products like Fertilizers, propane, and others will be exported from the refinery, which in return will bring in foreign exchange.
6. It will improve the use of local labor. I honestly don’t know what issue Dangote has with the Government. I don’t know whose fault it is, but the idea that Dangote is opting to buy feeds from other countries and then exports to African countries is sickening.
   On August 8, 2024, Anthony Chiejina, Chief Branding and Communications Officer of the Dangote Group, expressed concerns about the Nigerian Upstream Regulatory Commission’s (NUPRC) enforcement of domestic crude supply obligations. According to Chiejina, the Nigerian National Petroleum Company Limited (NNPC) supplied only 60% of the 50 million barrels it had lifted. He further stated: For September, Dangote Group requires 15 cargoes, but NNPC allocated only six. Despite appealing to NUPRC, the company was unable to secure the remaining cargoes. International Oil Companies (IOCs) producing in Nigeria redirected Dangote Group to their international trading arms or claimed their cargoes were already committed. He concluded by insisting that they are unable to secure their full crude requirement from domestic production and urge NUPRC to fully enforce the domestic crude supply obligation as mandated by the PIA.
   In dire situations like this, it is always important that the government works side by side with private companies such as Dangote. I will give a good example of when such collaboration has saved a country. During World War II, the US government partnered with American automobile companies to produce weapons and military vehicles, including armored tanks. Producing vast quantities of weapons and equipment needed to support the military. These companies include:
7. Ford Motor Company
8. General Motors (GM)
9. Chrysler Corporation
10. Willys-Overland Motor Company

My point is that the production of vast quantities of weapons and vehicles played a crucial role in the Allied victory. The partnership between the US government and automobile companies during WWII serves as an exemplary model of industrial mobilization and collaboration in times of crisis. Nigeria is in times of CRISIS. Solutions are needed, why not try what has worked in other countries?. We are in a state of emergency. Let us be sincere with ourselves, let’s tell ourselves the truth. Nigerians cannot pay the market reflective cost of petrol; it is never static.
Food for thought: instead of investing heavily in buses, tricycles, and palliatives, and pouring billions into a refinery with an uncertain future, wouldn’t it be wiser to implement a comprehensive subsidy framework that benefits all Nigerians?

Abíọ́lá Adégboyègá Kọ́láwọ́lé, Esq.