Thoughts on facing the harsh realities of subsidy removal in Nigeria
In May 2023, when President Bola Tinubu confidently declared that “the petrol subsidy is gone,” many Nigerians knew their lives were about to change. However, what few anticipated was just how rapidly things would deteriorate. With no concrete plan to cushion the effects of the subsidy removal, Nigerians have since been struggling with skyrocketing prices on almost every front — fuel, electricity, food, and even essential services like obtaining a passport or driver’s license.
On a recent Wednesday, I paid N1,120 per litre for petrol at an independent fuel station, and I almost wept. This was a sharp increase from the N855/litre I was accustomed to paying at NNPC retail stations, and worse, just hours later, the official NNPC price jumped to N998/litre. I’m still wondering if the price I paid was based on the old rate or if they were simply quick enough to revise their price. The disparity in prices across various parts of the country, particularly in regions like the North and East, where haulage costs drive up fuel prices even more, leaves one wondering how citizens are coping with this relentless inflation.
The removal of the petrol subsidy caused an immediate and severe price hike. Before the president’s announcement, the petrol price stood at N198/litre at NNPC stations. Within days, it shot up to N540/litre, and the ripple effects began to spread across the economy. Transportation costs soared, food prices followed suit, and Nigerians were faced with an even bleaker financial reality.
The inflationary pressures didn’t stop with fuel. Electricity tariffs also climbed significantly. About six months ago, the Nigerian Electricity Regulatory Commission (NERC) approved a tariff increase for Band A customers, raising the rate from N68 per kilowatt hour to N225 — an astounding 300% increase. While the tariff was later adjusted to N206.80/KwH, this only provided a small respite for consumers. According to NERC, only 15% of consumers were affected by this price review and this population consumes about 40% of the nation’s electricity.What other costs have gone up? Almost everything. The price of obtaining a Nigerian passport has seen a sharp increase — 32-page passports, which used to cost N35,000, now cost N50,000, while the 64-page passport has jumped from N70,000 to N100,000. Similarly, the Joint Tax Board (JTB) has raised the cost of obtaining a driver’s license, and vehicle number plates will follow suit in November 2024. The three-year driver’s license now costs N15,000, and the five-year option costs N21,000.
Nigerians are facing mounting costs on all sides — transport, housing, food, education, and more. While incomes have stagnated or, in many cases, declined, the purchasing power of the Naira has plummeted. In May 2023, the Naira traded at N460.72/$1, but it has since devalued to about N1,616.72/$1. This means that for the same N1,000,000, which could buy $2,170.51 in May, one would now get just $618.53.For decades, Nigerians have lived under a system where subsidies kept essential commodities — like petrol and electricity — artificially low. This created a kind of “subsidy dependency,” masking the true costs of living.
While the government has long argued that subsidies drain public finances and should be eliminated, the abrupt removal without any social safety net has left citizens exposed to extreme price volatility and inflation. Subsidies, particularly in sectors like transportation, health, and education, play a vital role in ensuring that citizens maintain a basic level of dignity.
The removal of these subsidies without adequate planning for alternatives has left many Nigerians worse off.Critics argue that the problem is not necessarily with subsidies themselves, but with how they were managed. Nigeria’s subsidy programme was marred by inefficiency, corruption, and poor oversight, leading to waste and fraud. Had these issues been addressed, subsidies might have continued to benefit ordinary Nigerians while relieving the government of some financial strain.
The government’s position has been clear — there is no more money for subsidies. Yet, citizens look at the extravagant spending habits of government officials — luxury cars, lavish foreign trips with large entourages that result in more promises than results — and question the sincerity of this claim. If the government has no money for subsidies, why is it not tightening its belt like the rest of the country?In truth, subsidies can be an enormous financial burden, but their removal without compensatory measures — such as increased social welfare programmes, verifiable direct cash transfers, or job creation initiatives — risks plunging more Nigerians into poverty.
The social implications of this policy are already being felt, with inflation rising and the purchasing power of the Naira continuing to weaken.So, what’s the way forward? There must be a balance — a middle ground where the government can implement necessary reforms without pushing vulnerable populations deeper into poverty. This could involve gradually phasing out subsidies, but only after implementing programmes that directly help those most affected by the price hikes.Additionally, addressing the inefficiencies in governance is crucial. Nigeria’s debt profile is unsustainable, and the country cannot continue to rely on borrowing to cover its expenses. If the government is serious about removing subsidies, it must also be serious about cutting down on its own spending. It must also invest in sectors that can stimulate economic growth, like agriculture, technology, and infrastructure.
Nigerians are resilient, but even the strongest can only endure so much. The effects of subsidy removal are real and painful, and it is clear that many are barely managing to stay afloat. The government has a responsibility to provide not just lip service but real solutions to alleviate the suffering of its people. The road ahead will be tough, but with proper planning, fiscal discipline, and a focus on social welfare, there may still be hope for a better future.As we brace for more economic challenges, one can only hope that our leaders recognize the urgency of the situation and act before it’s too late. I wonder how much the average citizen can take and I do sincerely hope that this government has an actual plan to ameliorate the people’s sufferings.
This is the way I see things today.