Beyond Palliatives: Unraveling the Complexities of Nigeria's Current Crisis

Reintroducing Subsidy and Finding a Way Forward

By Abí??lá Adégboyègá K??láwál??lé, Esq.

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I disagree with the Director-General of NOA, Lanre Issa-Onilu, who recently stated on Channels Television's Sunrise Daily that "Poverty will worsen if Petrol Subsidy Returns." His claim lacked any substantive analysis, so how are Nigerians expected to take it seriously?

The truth is clear: Nigerians cannot pay the market-reflective cost of petrol, which is constantly fluctuating.

The Palliative Approach: A Short-Term Fix

Providing palliatives is merely reactionary. It does not address long-term issues. How long are we supposed to rely on temporary relief?

The trust deficit between leaders and citizens in Nigeria is stark. Corruption and mismanagement have historically hindered the distribution of resources. While President Tinubu has made efforts to distribute palliatives to state governments to mitigate inflation, the impact is minimal. For most Nigerians—including myself as a private lawyer—these relief measures do not reach us.

A personal example: Three days ago, I spent N52,000 on fuel at NNPC at a rate of 617 naira per liter after waiting in line for over an hour. The cost of living, professional expenses, and emergencies highlight how inadequate palliatives are in addressing real economic challenges.

Promises vs. Reality

On July 31, 2023, Dele Alake, President Tinubu's Special Adviser on Communication and Strategy, announced plans to provide buses and CNG-powered vehicles to students and the general public to cushion the impact of subsidy removal. Over a year later, these promises remain largely unfulfilled.

Solutions to the Crisis

1. The Ideal Solution: Local Production

The best scenario would be for Nigeria to produce enough petrol locally so that prices reflect domestic production costs. Unfortunately, attempts to rehabilitate Nigerian refineries have repeatedly failed due to corruption and mismanagement. For example, in 2021, $1.5 billion was allocated for the turnaround maintenance of the Port Harcourt Refinery, but meaningful results have not materialized.

2. The Immediate Solution: Reintroduce Subsidy

While subsidy programs have historically been plagued by waste and corruption, the focus should be on improving the process, not rejecting the concept outright.

• Consumption vs. Production Subsidy: Subsidizing consumption benefits everyone, unlike production subsidies, which often favor a select few.
• Global Examples: The U.S. and Egypt heavily subsidize fuel and other essential commodities, even as oil producers themselves.

In 2023, the U.S. produced 12.8 million barrels of crude per day and spent billions on subsidies. Egypt increased its fuel subsidy allocation by 326% for 2023/24 despite having 12 operational refineries. Nigeria should take note.

3. Alternative Solution: Support Private Refineries

The Dangote refinery has the potential to stabilize fuel prices and reduce the need for subsidies, but only if the government ensures access to domestic crude supplies.

• August 8, 2024: Dangote Group highlighted NUPRC’s failure to supply sufficient domestic crude. This bottleneck prevents the refinery from reaching its full potential.
• Providing Dangote with required feeds would reduce costs across the fuel value chain, increase foreign exchange earnings, and improve local labor utilization.

Historical Example: During WWII, the U.S. partnered with automobile companies to mass-produce military vehicles and weapons. Similarly, Nigeria must collaborate with private refineries to address this crisis effectively.

Food for Thought

Instead of spending billions on palliatives, buses, tricycles, and an uncertain refinery future, why not implement a comprehensive fuel subsidy framework that benefits all Nigerians? The truth is evident: Nigerians cannot pay the full market price for petrol. Immediate, practical solutions are required.

Written by:

Abí??lá Adégboyègá K??láwál??lé, Esq.