President Muhammadu Buhari led the opposition party, the All Progressive Congress (APC), in vehement opposition to the removal of petrol subsidies before he won the 2015 presidential election.
President Buhari stated at the time that there was no petrol subsidy and that the government at the time, led by President Goodluck Jonathan, was corrupt and was looking for ways to defraud the Nigerian people in order to enrich itself.
President Buhari is leaving Nigeria with the highest amount ever spent on fuel subsidies after eight years in office and just days remaining of his two terms in office.
The cost of the petrol subsidy from 2015 to 2020 was N1.99 trillion, according to oil and gas industry reports produced by the Nigeria Extractive Industries Transparency Initiative (NEITI).
Additionally, reports provided to the Federation Accounts Allocation Committee (FAAC) by the Nigerian National Petroleum Corporation (NNPC) revealed that the cost of gasoline subsidies totaled N1.27 trillion from January to May 2022 and N1.57 trillion in 2021 alone. For the period of June 2022 to June 2023, the government has set aside N3 trillion in its budget to pay for fuel subsidies.
The total cost revealed that the government would have spent N7.83 trillion on fuel subsidies under President Buhari.
Despite promises, refineries are still inactive
While Nigeria’s four refineries in Port Harcourt, Warri, and Kaduna were not operating at full capacity in 2015, they still produced six million litres of petrol per day for domestic use. President Buhari promised Nigerians through the then-Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, that the refineries would resume operating at full capacity by the end of the year. It never took place.
The refineries were partially shut down for maintenance in 2017, but after two years with no progress, they were completely grounded in 2019.
The refineries are still being repaired and are being mismanaged badly when the president departs in about three weeks. With loans from the African Development Bank, NNPC announced in 2021 that it would spend $1.5 billion to completely renovate the Port Harcourt refinery. Refineries in Kaduna and Warri are going through a similar process.
Expert comments
Speaking to Saturday Vanguard, oil and gas governance expert Mr. Henry Adigun said President Buhari is leaving the situation worse than he found it because he hasn’t solved the problem of petrol subsidies in eight years.
Mr. Adigun claimed that the politics and sentiment surrounding the matter had contributed to the nation’s massive debt load and that President Buhari was unaware of the scope of the problem and possible solutions.
He asserted, “The first thing is that you cannot effectively manage what you do not comprehend. Our politicians frequently speak without evidence and from emotion. Sometimes they disregard expert advice and tell you how long they have served in government.
“The man didn’t believe there was a subsidy, and they all assumed it was corruption, but when they arrived and saw it right in front of them, they discovered the truth, and once they discovered the truth, they were forced to make difficult choices. Buhari made a move in 2016, increasing the price of petrol from N87 to N145, but he failed to maintain it. It was time to let it go permanently at that point, but he stopped it.
“They made the situation worse by capping it, not providing enough foreign exchange for other importers, and allowing only NNPC to become the product’s sole importer in the nation. They now have a problem as a result of that.
“What they did in the last eight years has worsened the situation for the nation and the incoming administration. Both the price and the quantity have skyrocketed. They failed because they politicised the issue and lacked understanding.
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He stressed that the difference in the approved exchange rate for the NNPC compared to the other importers made it impractical for the others to import and remain profitable. He went on to explain that NNPC became the sole importer of gasoline for economic reasons.
Therefore, Adigun urged the incoming administration to first calm down and comprehend the issue before making a decision regarding the petrol subsidy issue.
He pointed out that the government should eventually relinquish any control over the downstream industry and let the private sector drive the nation’s growth and economic development.
Although the private sector has the money to save Nigeria, they won’t invest in areas where they can’t make a profit. Look around you in Abuja and Lagos; everyone is investing in real estate or fintech because those are the areas where they can expect to see good returns. The government should not construct or renovate refineries, he continued.
He argued for gradual subsidy elimination as opposed to all at once, pointing out that the government had raised electricity rates frequently over the previous two years, effectively eliminating the subsidy on power.
He said: “Let’s have something like a three-month phased removal because labour unions will be against it and it will become a political issue.” He also warned that the new government would find it difficult to finance its operations unless it adopted a massive borrowing strategy as Buhari had.
TABLE – Petrol
Subsidy under Buhari
2015 ——————— N316.70 bn
2016———————- N99.00bn
2017 ——————— N141.63 bn
2018 ——————— N722.30 bn
2019 ——————— N578.07 bn
2020 ——————— N133.73bn
2021 —————— N1.573trn
