Nigeria and the endless questions on fuel subsidy

By Olajide Adeniyi

If the disclosure of Umar Ajiya, the Nigeria National Petroleum Corporation (NNPC) Financial Officer, is anything to go by, Nigeria would have expended a princely sum of N7.8 trillion or $4.9 billion to make fuel price sell at a lower rate than it should ordinarily trade. That will amount to 23.15 percent of this year’s N33.7 trillion budget, including the recently passed supplementary votes. When put side-by-side the votes for infrastructural projects and other capital spending that will directly impact citizens, it will post about 42.58% of the expected revenue of N18.32 trillion for the fiscal year.

The numbers seem frightening, right? And, to imagine that the N7.8trn expenditure to subsidize fuel consumption, according to Ajiya, is for only seven months makes it more worrisome. This feeling, I guess, propel a new round of questions from Nigerians on what exactly is the money used for because President Bola Tinubu had declared an end to the regime of fuel subsidy in the country.

It would be recalled that Tinubu had during his inaugural speech on May 29, 2023, pronounced an end to the practice of subsiding petroleum product for Nigerians. The development spiral the price of the product from N198 to a litre it was selling to over N500 per litre before its current price of about N600 to a litre at NNPC’s outlets and major marketers fuel stations. In many other filling stations, particularly independent marketers, fuel sell between N800-N900 per litre.

Looking at the situation on ground, it will not be so hard to understand why many Nigerians are agitated. If indeed subsidy is gone and Nigerians had to pay more for fuel, then the country should not be losing money to the same scheme it claimed no longer exist. At the onset of the policy announcement, there were assurances, including from the national oil firm that the removal of fuel subsidy will free a lot of money for the country to expend on things that will benefit citizens.

However, the reality, especially in the light of the recent disclosure, point otherwise. Because, instead of generating savings for the country to fund physical projects and human capital developments, what we could see is a terrifying amount of money going into servicing the subsidized fuel. Although Ajiya tried to tweak the expenditures as different from paying subsidy but the facts are too glaring to twist.

“What has been happening is that we have been importing PMS, which has been landing at a specific cost price, and the government tells us to sell it at half price. So the difference between the landing price and the half price is a shortfall,” Ajiya disclosed at a media briefing in Abuja on Monday. If what Ajiya said is not subsidy, then what is it? The Oxford Language Dictionary defines subsidy as “a sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service low.”

In short, the NNPC do not have to give marketers ‘any kobo’ as Ajiya contended to have paid subsidy. That the NNPC do not give any marketer kobo is even in contention, especially in the light of a recent revelation that some marketers import fuel from Malta and sell it to the country’s topmost oil firm. A particular instance was a March 4, 2024, letter quoted by an online newspaper, the Daily Nigerian, that indicated the sale of a fuel cargo by MRS Oil and Gas to the NNPC. Excerpt of the letter, the paper divulged, read thus: “We MRS Oil and Gas Co. Ltd., hereby confirm that we sold full cargo on board MT AETHER (91,219.232 MTV) with bill of lading dated 19/02/2024 to NNPC for delivery offshore Lagos.”

Notwithstanding this, it is not in doubt anymore is that money was used to make fuel sell at a lower price than it should ordinary sell and whether NNPC paid itself or it was marketers that got it isn’t the issue here. N7.8trn is a whole lot of money and is more than enough to fix the entire primary healthcare centres in the country and stock them with drugs, hence, solve the healthcare needs of all Nigerians.

The most disturbing thing here is that Nigeria may not have a clearcut way to cough out the N7.8trn debt that the NNPC said the ‘shortfall’ to sell fuel at the price it sold them to Nigerians at the prompting of the government gulped. A publication by one of Nigeria’s leading online newspapers, TheCable, had indicated that the NNPC had secured the approval of Tinubu to use the federation dividend for the year 2023 in the oil firm to service part of the debt.

The balance of the oil subsidy debt, according to the paper, will be defrayed from potential earnings to the federation account from royalties and taxes from the NNPC. In addition, the NNPC per TheCable, is expected to pause the payment of interim dividends from May to December this year, which is likely to go to the fuel subsidy payment, although, disguised as “Subsidy shortfall/FX differential”.

This is concerning, especially for a country that has nearly half of its population in abject poverty. Only recently, young people poured into the streets to protest increasing cost of living and the dearth of opportunities, which has left many in a precarious situation. Between May 2023 and now, inflation in Nigeria has gone up by more than 35 percent as basic food items and other necessities are becoming a luxury for ordinary Nigerians.

In 2022, the National Primary Healthcare Development Agency (NPHDA) made a shocking revelation at its PHC Summit, pointing out that about six out of 10 Nigerians lack access to quality primary healthcare services. A recent estimates, which are corroborated by the House of Representatives on Insurance and Actuarial Matter and Healthcare Services, put the number of Nigerians with healthcare coverage at measly 10 million while over 190 million of the population are uncovered.

Unemployment in Nigeria, most especially among the youth, remains embarrassingly high and draining hopes. Underemployment is becoming a menace just as dwindling productivity in the economy is forcing many Nigerians out of their jobs and pilling up pressure on the labour market. The 7.8trn used to pay for the opaque subsidy in seven months can power the entrepreneurial objectives of at least 780,000 young people with a N10 million grant each.

This go to show that Nigeria may have been spending on the wrong thing despite the attendant pain on ordinary citizens. Government spending should be focused on what has direct bearing on Nigerians and not what line the pocket of privileged few as the subsidy or shortfall, whatever you choose to call it has shown. Even worrisome is the fact that much of the money end up escaping the Nigeria economy and contribute to the precarious situation facing the country at the moment.

Money that could have helped fight poverty, build roads, equip our universities, fix our dilapidated health infrastructures, and enable productivity, which will in turn, will open up opportunities for citizens, are lost to a scheme that burdens the nation rather than provide relief. This can never be right and justifies the concerns of some Nigerians who questions the sustenance of the scheme.

Nigeria can not continue on this path. The time has come to break the circle and chart a new direction, which unlike the current situation, will ensure that the wealth of the people is spent on what will directly benefits them. As the past has clearly shown, throwing huge money into a scheme that is open to manipulation, is not working and causing more pains instead of relief. This is more reason why we need to break this circle and focus resources on fixing the country’s deplorable road network, taking as many out-of-school children out of the streets, and expanding coverage of health insurance schemes, among a host of other impactful interventions.