Rethinking subsidy removal

27 May 2015, Lagos – The latest round of petroleum products scarcity, which held the country hostage in the past three weeks, has re-ignited the debate over whether to keep or remove the so-called subsidy on the price of these essential energy products.

IPMAN-fuel pumpSome argue that, as an oil producing country, the people have the right to continue to enjoy the subsidy. Some others continue to insist that there is no subsidy, but rather, that the policy is a ploy to corruptly enrich a few privileged members of the elite with the resources of the nation, create overnight multi billionaires and allow the major merchants of these products and workers in the sector to hold the nation to ransom from time to time.

Those who believe in the removal of the subsidy say it will make the recurrent incident of fuel scarcity a thing of the past, or at least, reduce it to the barest minimum. They point to the telecoms industry, which was removed from the monopoly of the Nigerian Telecommunicatins Limited (NITEL) by the President Olusegun Obasanjo regime fourteen years ago. Since that time, nobody hears about strikes in the sector. Furthermore, telephone, which was touted as being a luxury service for the rich, is not only available to everyone with service providers offering generous discounts to win more customers, the sector has also become one of the greatest sources of direct and indirect employment in our economy.

They also posit that deregulation of the petroleum products sector will create a similar commercial impetus and hasten the proliferation of refineries in the country since official red tape will give way to forces of demand and supply.

We are persuaded to believe that the time to take deregulation of the downstream sector of the economy seriously has come.

The advent of a new regime of President-elect, Muhammadu Buhari, which has already mooted its inclination towards effecting the removal of the subsidy, is the opportune moment to get it done once and for all. Had it been allowed in January 2012, when we had the last major crisis in the sector, perhaps, by now we would have been spared the agony of having to go through the asphyxiating hostage which marketers and workers unions in the sector subjected the nation to recently.

The truth is that with the oil boom over, the nation can no longer afford to shell out trillions every year to pay for petroleum subsidy.

We, however, caution that before the subsidy is removed, it must be planned to ensure that operators in the sector do not exploit the people and disrupt the rhythm of economic activities; and that those who try to do so are promptly brought to book.


– Vanguard

About the Author