Nigeria imports petrol because she can’t meet her demand for refined oil, our refineries can’t refine our crude oil or petroleum into petrol so we import, the major problem here is the high exchange rate when importation takes place which makes the petrol so expensive, so the Federal Government has to subsidize petrol so everyone can afford it. Contrary to popular belief, it is the rich, not the poor who benefit from Nigeria’s fuel subsidy so effectively the government is subsiding the rich. The poor in Nigeria rely primarily on public transportation, in doing so their per capita fuel consumption is significantly less than the rich who generally use private vehicles. Neighbouring countries also benefit from the Nigeria fuel subsidy through smugglers who smuggle petrol from Nigeria to their countries to sell at a higher price.
Moreover, another problem with subsidy is that the people believe that it is just another ploy by Nigeria’s elite to further capture the country’s resources. Cost of fuel subsidiary has continued to grow exponentially because of the cost of fuel, the government has to spend more to keep domestic prices low, increase in population results in increased fuel consumption together this made the cost of fuel subsidy unsustainable. Nigeria’s fuel subsidy continues to crowd out other development spending keeping the domestic price of oil artificially low with fuel subsidy has discouraged other additional investment in Nigeria’s oil sector, investors will not want to recoup their investment under artificially low price structure. The four refineries in Nigeria are running below their capacity due to operational failures, poor maintenance, sabotage on crude oil pipelines, theft etc. Therefore, creating new refineries won’t change anything because crude oil will still be bought at the international price which is dollars neither can a body be suggested for effective management and maintenance this is because we have always had a body but it has failed. The rising world fuel price has caused an increase in subsidiary over the year thus damaging the country’s economy. The biggest beneficiaries of this subsidy have always been the rich, importing countries and wholesalers who smuggle some of the subsidized fuel into neighbouring countries and sell at higher prices, Fuel subsidy does not promote Nigeria’s economy. In other words, the subsidy policy is not effective and should be removed.
In conclusion, the implementation process of fuel subsidy is not effective and fuel subsidy should be removed to prevent the wastage of taxes and government fund.
– Article written by Oreoluwa Disu, NYSC 2018 Batch B