Fuel subsidy cut will save Nigeria but impose burden: President
The elimination of the subsidy has angered Nigerian unions, but they have suspended a strike indefinitely after consultations with the government.
Nigeria’s new president Bola Tinubu has said his decision to scrap a popular petrol subsidy would place an additional burden on citizens but free up money for education, regular power supply, transport infrastructure and health care.
“I admit that the decision will be an additional burden for the masses of our people. I feel your pain,” Tinubu said in a Democracy Day broadcast on Monday.
The subsidy had kept gasoline prices low in Africa’s largest economy for decades, but it was becoming increasingly expensive for the country — the government spent $10 billion last year — leading to bigger budget deficits and higher public debt.
Petrol prices have almost tripled in Nigeria, angering unions and causing a spike in transport costs. It has also affected small businesses and millions of households that rely on gasoline generators for power due to intermittent grid supplies.
It was his first public reaction since announcing the end of the gasoline subsidy after being sworn in on May 29.
Nigerians, the president said, should bear the decision to “save our country from destruction”.
“The government I lead will repay you through huge investments in transportation infrastructure, education, regular power supply, health care and other public amenities that will improve the quality of life.”
He gave no timeline of when this would happen.
The Nigerian government introduced an oil subsidy in the 1970s to cushion the effect of rising oil prices on the world market. Olusegun Obasanjo’s military regime formalized the subsidy in 1977 when it enacted the Price Control Act regulating the prices of items, including fuel.
Eliminating the fuel subsidy was one of the key reforms Tinubu promised during the presidential election campaign.
Subsidy became a national buzzword in January 2012 when then-President Goodluck Jonathan announced the elimination of the subsidy. Fuel prices rose from 65 naira ($0.14) to 140 naira ($0.30) per liter sparking nearly two weeks of protests known as #OccupyNigeria.
This time, the abolition of the subsidy enraged the unions, but they suspended a strike indefinitely after consultations with the government. The unions want a more than six-fold increase in the monthly minimum wage of 30,000 naira (about $65) from a slew of demands.
Rating agencies Fitch and Moody’s have said Tinubu’s willingness to face the fuel subsidy and plans to unify the country’s multiple exchange rates has been positive for the economy.