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Fuel Subsidy Removal… Buhari to the West: ‘You are Hypocrites’

By Yange Ikyaa

Nigerian leader, President Muhammadu Buhari, has said that his government will continue to pay fuel subsidy, in his latest response to calls from both within and outside Nigeria for him to scrap the expenditure.

He further explained that such a policy won’t be implemented in the country as soon as its proponents expect, insisting that current realities make it impossible to do so. The president also described calls by Western institutions for Nigeria to end this very expensive national expenditure as hypocritical, saying also that the same Western countries are now paying subsidies on energy.

If the subsidies being given in the West on energy consumption are predicated on the supply chain crises prompted by the war between Ukraine and Russia, the Nigerian leader also believes that the socio-economic realities faced by his nation at the moment cannot allow him to end all gasoline subsidies and instantly allow for complete deregulation of the downstream petroleum market in the country.

The decision to either remove fuel subsidy or allow it to continue unabated was a major campaign issue during the political campaigns that eventually brought President Buhari to power in 2015. And immediately after his electoral victory, he was advised by the transition committee that he constituted to end the fuel subsidy programme and privatize Nigeria’s four refineries as a way of improving energy efficiency and helping the nation’s economy to grow.

Also, in November last year, the International Monetary Fund (IMF) told the Nigerian government to completely remove fuel and electricity subsidies as early as in the first quarter of 2022.

After the Fund’s preliminary findings at the end of its official staff visit to the country, IMF also called for reforms in fiscal, exchange rate, as well as trade and governance aspects of Nigeria.

This, it said, should be considered a top priority as part of the government’s fiscal policy, describing it as “necessary to alter the long-running lacklustre growth path” of the country.

Nigeria, which is Africa’s top oil producer and the continent’s biggest economy, heavily subsidizes gasoline prices, even as it still relies almost completely on refined product imports for the bulk of its domestic energy demand. The reason for this unsustainable energy policy and market practice is the existence of an overaged midstream energy infrastructure and a hugely underperforming refining system.

This perennial regime of consumption subsidy has cost the country billions of dollars that could have otherwise been invested into the development of vital infrastructure in different sectors of the national economy in order to stimulate economic activity, create jobs, increase household incomes, and improve living standards.

Worse more, it has been reported that Nigeria’s energy subsidy programme falls short of the best transparency standards and was alleged to have paid out over $6 billion in fraudulent claims in 2012.

Such programmes are also classified as anti-market and populist, but those with either the powers to end them or voices loud enough to call for reforms continue to see more reasons why these subsidies should be maintained.

“Denmark has now issued its first level warning alert over energy supplies. This was shortly after the Netherlands became the latest country to remove restrictions on coal plants. Nigeria and other African economies must take resilient exception to being lectured about so called climate pledges, as energy security must be the key driving factor of policy thrusts,” said James Shindi, 1st Chief Executive at Brevity Anderson Consulting, United Kingdom,

In agreement with Shindi, Mohammed Mijindadi, who is the President of GE Nigeria and Managing Director, GE Gas Power System (GPS), we need to speak with one voice and ensure we are signing up for a responsible plan that works for Africa.”

The Federal Government has made repeated assurances that Nigeria’s capacity to produce refined fuel is set to step up significantly between this year and 2023, as private players and modular refineries are billed to come on board. Some of them include the Dangote Refinery in Lagos, the BUA Group Refinery in Akwa Ibom, and the Waltersmith Refinery in Imo State.

Responding to questions posed to him by Bloomberg, President Buhari spoke extensively at what he is doing through policies and projects in the entire oil and gas value chain of Nigeria as a means of ensuring market stability and energy sufficiency in the country.

His words: “Most western countries are today implementing fuel subsidies. Why would we remove ours now? What is good for the goose is good for the gander,” he asked.

“What our western allies are learning the hard way is what looks good on paper and the human consequences are two different things. My government set in motion plans to remove the subsidy late last year. After further consultation with stakeholders, and as events unfolded this year, such a move became increasingly untenable. Boosting internal production for refined products shall also help.”

“Four years ago, we unveiled plans for a new gas pipeline connecting Nigeria to Europe. Last week (2nd June) in record time the Nigerian National Petroleum Company (NNPC) entered into an agreement with the Economic Community of West African States (ECOWAS) for its construction,” he said.

“Concurrently on 1st July the NNPC will become a Limited Liability Company and be subject to more robust auditing and commercial disclosure obligations. It will help stimulate investment and boost transparency, where corruption has deterred the former and stymied the latter.

“My administration is the first to pass this landmark reform in our oil and gas sector, after two decades of predecessors’ failure to do so – no doubt due to vested interests.

“Criminality and terrorism in oil-producing regions hamper production, and it would help if our Western allies designated IPOB as a terrorist group, given their complicity in damage to pipelines and infrastructure.

“We have invested in our security forces, including the $1 billion military deal with the U.S. for the acquisition of A-29 Super Tucano aircraft.

“These efforts are making an impact: wells that had to be closed due to criminality have now reopened. With these efforts, OPEC has raised our quota for next month.”

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