ENDING FUEL SHORTAGES IN NIGERIA
The issue of perennial shortages of petrol in the country appeared to have been permanently resolved on May 11, 2016, when the federal government introduced a new pricing regime that increased the pump price of petrol from N86 per litre to N145 per litre. Fast forwarding to December 2017 till February 2018, the issue of scarcity and fuel subsidy seems to take worse turn with long queues at filling stations and increased fares on public transportation due to shortages. Fuel subsidy is the Nigerian government’s financial aid to Nigerians to enable the consumption of fuel at a cheaper rate, end unpredictable supply, and ensure stability in domestic fuel price.
The fuel subsidy payment was initially introduced as a policy into Nigeria during the Ibrahim Babangida administration when our refineries failed due to non-maintenance. It was introduced to temporarily stabilise the price of petroleum products while the refineries underwent rehabilitation. The policy that was meant to last only six months has now lasted for 24 years!
However, during Goodluck Jonathan’s administration, it was openly declared that fuel subsidy payment will be removed partially; leading to a nationwide protest by Nigerians which was popularly called ‘Occupy Nigeria’, but in truth fuel subsidy payment was in fact sustained.
Fuel subsidy removal was said to be beneficial to the Nigerian economy. Amongst the few advantages are its ability to help reduce hoarding, smuggling and diversion of petroleum products and help ensure product price, and free market stability through private sector participation, stabilising the labour market, enabling employment creation through new investments in private refineries, oil retailing, and loss of excess crude via gas flaring; ensured competition in the industry and market forces which will drive down the price of petrol in the long run as witnessed in the telecoms sector. The subsidy removal will give government access to more funds for development of other sectors such as education, health, employment, transportation.
But there are also disadvantages, especially on the other sectors of the economy. A few unfavourable effects that should be expected from this development will be the obvious increased cost of living: with the price of premium motor spirit (PMS) increased, the economy will face a sudden surge of inflation. Inflation is defined as a general and progressive increase in prices for goods and services. Transportation cost has gone up as much as 300 per cent since the N145/litre increase.
This increase has caused a ripple effect on other sectors of the economy which revolve around transportation; increase in the cost of small scale business services especially those businesses that depend on subsidised fuel to render services, as public electricity supply. In the current administration, the decision of the Muhammadu Buhari administration to remove the subsidies on petroleum products has not been received well by Nigerians. Expectedly, there is outrage among the citizens given the economic hardship the masses are facing now. Many Nigerians are still not aware of the benefits of the policy because of lack of awareness and education by government and its agencies.
The Nigerian economy seems to be synonymous with fuel shortages. It does not seem to matter which regime is in charge, every couple of years, or in some cases months, the problem rears its ugly head. Every regime follows the typical playbook in dealing with the scarcity: sympathise with Nigerians and talk about how they shouldn’t be wasting useful hours queuing for fuel; talk about how marketers, smugglers, and various middlemen are sabotaging the economy for their own selfish interests; promise to revamp the refineries; pay off marketers so they can settle their debts, import new products and flood the market with fuel, with the hope that it makes the scarcity go away. In all this we often forget to ask ourselves a simple question: Is fuel scarcity the problem or is it just a symptom of the problem?
The long-term solution is for the government to simply stop fixing prices. Let markets work and let prices be set by buyers and sellers like every other commodity. Prices will go up and down like everything else. People rarely bother about small increases in prices even if it happens frequently.
It’s the large overnight increases that get the blood boiling. Functioning markets will ensure that we get rid of the scarcity once and for all and that we stop the reckless subsidy spending. It’s also time that we, as a country, stop repeating the lie that the fuel price fixing is about helping the poor. We all know it’s about politics. It’s always about politics.
Rahma Oladosu, Wuye, Abuja