By Paul Olayemi
The Senator-Elect for Delta Central Senatorial District, Chief Ede Dafinone has said that there would never be a time for fuel subsidy removal in the country without it causing temporary pains to the Nigerian populace.
Dafinone, an economist and a renowned chartered accountant stated this while speaking to a team of journalists on the raging debate on the impact of the petroleum subsidy removal as was announced by President Bola Tinubu during his inaugural address as the nation’s 16th president.
He called on Nigerians to prepare to adjust to the painful future reality of buying fuel at higher prices, noting that no matter how long the decision is postponed, it’s a hard decision that Nigeria must take as a nation, as the government cannot devote such a significant proportion of the annual budget to fund the fuel subsidy.
He, therefore, charged Nigerians to look at the brighter side of the policy as the government would be able to use the funds previously spent on fuel subsidies to affect health, education, power, police, infrastructure, and other critical sectors. He noted that the long-term benefits to the country would outweigh the pains.
Dafinone further noted that the rumoured lack of transparency in the management of the petrol subsidy has led to many Nigerians being in favour of the removal of the subsidy despite the hardship that it would bring to the population.
According to the former Chairman, of the Manufacturer’s Association of Nigeria Export Promotion Group, “while the impact of the subsidy removal is immediate; the benefits that the country would derive through the redirection of the about N400b spent monthly on Subsidy (according to NNPC records) would take about 6months to one year to be felt by the populace”.
The timing of its removal is in adherence to the budget approved by the outgoing administration as the 2023 budget makes no provision for petrol subsidy for the second half of the year. President Bola Ahmed Tinubu only emphasized the policy change announced by the past administration. His statement removes the uncertainty on a major component of government expenditure and would no doubt reassure our external creditors.
“I have also heard some people arguing that the President would have waited for the Dangote Refinery to be fully operational before the removal of the fuel subsidy.
Whilst I congratulate Alhaji Aliko Dangote for the success of the refinery project, the fact remains that the impact of the Dangote refinery selling its products in the Nigerian market would be marginal in terms of the cost of fuel at the pumps in Nigeria”.
It’s most likely that the Dangote Refinery will buy crude in US Dollars at global oil prices and will also sell to the Nigerian market in Dollars (or the Naira equivalent). However, it will be marginally cheaper than what is obtained internationally because shipping and other landing costs would not be a factor in the price build-up.
The Dangote Refinery is billed as an export refinery and needs to sell its products at competitive prices to enable them to pay back facilities from international and local lenders.
The removal of the fuel subsidy whilst temporarily painful will facilitate investment in public infrastructure, human capital development, and public sector reforms. These investments are necessary for economic growth and prosperity.