Africa’s largest economy has just made a landmark decision. It is a decision that would carry severe consequences, but with a depleting foreign exchange reserves, the government cannot but do away with petroleum subsidy.
Nigeria has for many years subsidise the pump/retail price of petrol. The absence of functioning refineries to provide petrol to oil marketers has made the country to be heavily dependent on importation. However, the fall in global oil prices has made it an inevitable decision.
In 2012, former president Goodluck Jonatha tried to remove fuel subsidies but the government was faced with a massive protest and criticisms from labour and organised civil society.
Opponents to Jonathan’s government said he lacked the moral capital to implement the removal because of a corruption-riddled government at the time. Many players in the downstream sector were accused of monumental corruption. Within six months in office, Jonathan’s government has blown over NGN 1.6 trillion on petrol subsidy. For
This time around, President Buhari who is seen to be credible might be having a soft-landing for daring to remove subsidies on fuel price. Coming into power with a mass-oriented campaign, his political capital might get some beating. Three days ago, he was singled out by the Archbishop of Canterbury who said ‘but the president is not corrupt‘ and he ‘trying hard’ to fight corruption.
However, Buhari with his strong stance against devaluing the Naira, close quarters to the government claimed it was a tough decision he had to take. Nigeria’s foreign currency reserves has fallen to an all time low. According to the CBN, the last figure is USD 27 billion. The government has been struggling to ration dollars for marketers as well as importers of essential commodities. It was clear to him that the rationing can only take the country a little more before everything collapse.
Taking out Forex for fuel importers is a major relief for the government but a big burden for Nigeria’s poor who are already facing the toughest economic condition in many years.