Nigerians 'Pained' Over Fuel Subsidy End

FILE: People queue at a petrol station in Lagos, Nigeria, Friday, Feb. 18, 2022. Long queues formed on Wednesday, May 31 to fuel up in the wake of new president Tinubu's announcement that fuel subsidies would immediately end. On June 1, prices roughly tripled.

LAGOS — Nigerians are struggling with surging fuel prices after newly elected President Bola Tinubu declared an end to popular subsidies, a move analysts and experts said was long overdue. The national oil company said it was losing massive sums every month due to the fuel subsidy.

After his inauguration on Monday, President Bola Tinubu's speech announced the "fuel subsidy is gone."

Then, price of petrol tripled to around 540 naira ($1.20) at government-run filling stations on Wednesday, effectively putting an end to subsidized fuel for Nigerians already battling inflation of over 20 percent.

But analysts believe Tinubu made a necessary political calculation to follow the lead of the previous administration and phase out the subsidy.

The country spends more on fuel subsidies than on failing sectors such as health and education, and the World Bank and the International Monetary Fund recommended ending the subsidies to boost development.

None of Tinubu's predecessors had managed to scrap the hugely popular system, which has been a burden on public coffers for decades. Last year, the country spent more than 96 percent of its revenue on servicing its debt.

Over the last decade, when the government tried to scrap the subsidies several times, it was forced to back down in the face of public anger stoked by unions.

The army clashed with protesters demonstrating over fuel costs in 2012.

An umbrella group of trade unions, the Nigeria Labor Congress (NLC), has rejected the latest announcement and called for its withdrawal.

"We advise Tinubu to respect his own postulations and economic theories instead of daring the people," the NLC said.

"It could be a costly gamble."

Tunde Ajileye of the Nigerian consultancy SBM said it was "only a matter of time before they stopped the subsidies."

"Economically, it was a sound and logical decision. Politically, it is a touchy decision," Ajileye said.

A key problem with the fuel subsidy was that it left ample room for embezzlement, with people falsifying documents to get hold of subsidies for products they never imported.

Others would buy cheap fuel in Nigeria and sell it at higher prices in neighboring countries.

Ajileye said this "explains why daily consumption is so high in Nigeria."

In the long run, the move will save billions of dollars, encourage investment, and reduce pressure on the foreign exchange market, said Abayomi Adebayo, an economics professor at Obafemi Awolowo University in Ife, northeast of Lagos.

The continent's biggest economy is oil-rich but has meager refining capacity. For years, it has swapped crude for gasoline that it then subsidized for its domestic market, causing a huge drain on revenue, foreign exchange and contributing to ballooning debt.

None of Tinubu's predecessors had managed to scrap the hugely popular system, which has been a burden on public coffers for decades. Last year, the country spent more than 96 percent of its revenue on servicing its debt.