A proposal by Nigeria’s new president to remove costly fuel subsidies has sparked a rush to snap up cheap petrol and led to long queues outside gas stations across Africa’s most populous country.Thank you for reading this post, don't forget to subscribe!
The fuel crisis erupted at the start of the week after Bola Tinubu, making his first address as president, abruptly revealed that the petrol subsidies costing Nigeria’s government about $10bn last year were now “gone”.
Many Nigerians responded to the announcement — which was a departure from the prepared remarks circulated earlier — by rushing to stock up before the subsidies were removed, sparking long lines at fuel stations and immediate scarcity.
A tripling of petrol prices by the state oil company on Wednesday sparked further panic, with the sharp increase to N557 ($1.20) per litre accompanied by a warning from NNPC that prices would “continue to fluctuate to reflect market dynamics”. Officially there is still a budget to subsidise fuel until the end of June.
A forecourt of a Mobil branch in the Lekki district of Lagos was filled with anxious motorists on Wednesday, with the queue outside stretching more than 1km. Clement Agbor, a taxi driver, said he had made little progress despite waiting more than four hours. “I haven’t been able to work today,” he said. “Look,” he added, pointing at the dashboard fuel gauge, “no fuel at all.”
The price of petrol has fluctuated wildly since Tinubu’s announcement. Lagos petrol stations were selling fuel at between N500 and N700 per litre, while Jerrycan-wielding profiteers were charging as much as N1,000 per litre, according to one who declined to give his name. The fuel price was as low as N184 as recently as last week.
Nigerians have long enjoyed cheap petrol due to subsidies introduced in the 1970s. They are hugely popular with ordinary Nigerians, who regard them as a rare benefit of the country’s oil wealth that otherwise bypasses them completely.
But the cost of subsidising petrol has ballooned, and would be expected to guzzle more than $7bn in the first half of 2023. The World Bank said late last year that continued subsidies were one reason why Nigeria faced a “fiscal time-bomb”.
Tinubu is desperate to make savings, having taken over a government with depressed state revenues and elevated debt levels. The country has not profited from the high oil prices caused by Russia’s war in Ukraine because its production has slumped to less than 1mn barrels per day due to theft and inadequate infrastructure.
The NNPC’s director said this week that the company was owed N2.8tn in subsidy payments by the government.
Adedayo Ademuwagun, a consultant at Songhai Advisory, said there was a consensus among Nigeria’s elite that the country could no longer afford to subsidise fuel.
Yet while he believed that phasing out subsidies was the right move, the manner in which Tinubu did it, a throwaway comment during his inaugural speech, was unwise. “Usually when you want to introduce a new policy you have people with . . . the proper credentials who sit down and figure out how to do it. There’s some rigour that should go into policymaking — you can’t just declare a subsidy’s ‘gone’.”
Successive Nigerian governments have shied away from removing the fuel subsides due to its potential to foment social unrest. Former president Goodluck Jonathan reversed course in 2012 when his decision to remove them sparked nationwide protests. Tinubu, then leader of the opposition, opposed their removal, saying at the time that Jonathan had “breached the social contract with the people”.
The cost of buses, which are run by private owners and serve as the major means of public transport, has risen across the country this week in reaction to the soaring petrol costs. The prices of ride-hailing services such as Uber and Bolt have jumped too.
Wilson Erumebor, a doctoral researcher in economics at Soas, University of London, said the increased prices would further fuel inflation of 22 per cent since Nigerians rely on petrol for transport, and electricity generation in homes and offices. He said the phasing out subsidies was the right policy in the long run, but that the government should find ways to minimise the impact on the most vulnerable.