Voices Unheard: Impact of Fuel Subsidy Removal in Nigeria

Photo by Marius Matuschzik on Unsplash

By

Mufidat Mahmood

Date Published

August 31, 2023

Category

Political Economy

Fuel subsidy has been implemented in Nigeria since the 1970s, arising from the need to cushion the effect of fluctuations in global oil prices on the Nigerian economy. The policy initiative placed a price ceiling on the price of fuel and saw the product sold below commercial prices. While this strategy introduced a degree of inefficiency, causing intermittent fuel shortages and the emergence of black markets, it also yielded advantages for Nigerians by contributing to a lower cost of living.

However, the unsustainable subsidy on fuel has resulted in the government removing it and allowing the market forces to determine price level. This has exacerbated pre-existing vulnerabilities and has resulted in a significant increase in the cost of living for most Nigerians.

This article highlights some of the challenges Nigerians are facing as a result of the removal of fuel subsidy. Interviews were conducted from individuals and households across the state capitals of two states in Nigeria (Adamawa and Borno) and the Federal Capital Territory, Abuja.

HOW HAS THE REMOVAL OF FUEL SUBSIDY AFFECTED INDIVIDUALS AND FAMILIES AROUND THE COUNTRY?

We engaged in discussions and conducted google form surveys to gather people's perspectives on how the removal of fuel subsidy in Nigeria has affected them and their families. Interviews were conducted for different age groups from 18 and above and for both genders.

  1. How has the removal of fuel subsidy in Nigeria affected your family’s overall cost of living compared to before?

The most common response we got was that households are spending more than double what they used to before the fuel subsidy was removed. Respondents revealed they spend more on fuel in a week now than they did in a month before the subsidy removal. Some also said they had to park their cars to start using public transport because they found it much more affordable compared to buying fuel. And those that had been using public transport before the removal of the fuel subsidy in Nigeria found it less affordable as they pay more than twice what they used to before.

“It has affected my family's financial situation very badly. I used to spend about ₦400,000 for family upkeep. Presently I am spending between ₦600,000 to ₦700,000.” -Dr. Mahmood from Adamawa state.

This particular response that there was a substantial increase in the cost of living was popular. A lot of people said family upkeep was quite affordable prior to the subsidy removal. High transportation cost has made even necessities unbelievably expensive. Stagnant incomes amidst rising prices are making families deplete their savings to meet basic needs. Also, Before the removal of fuel subsidy, people said they spent as low as ₦6000 on family upkeep on a weekly basis, but now they spend more than double the amount in a week.

  1. Have you had to make any significant adjustments to your lifestyle or daily routines because of the fuel subsidy removal? If yes, please describe the changes.

The removal of fuel subsidy has had a significant impact on people's expenses and lifestyle. They mentioned that they have been forced to cut down on various aspects of their daily life due to the increased cost of fuel. They have also had to restrict the consumption of certain goods and services. This could involve cutting back on non-essential items, choosing cheaper alternatives, or simply reducing overall consumption. By doing so, they aim to manage their finances more efficiently and cope with the rising costs resulting from the removal of the fuel subsidy.  

Furthermore, respondents revealed that the removal of the fuel subsidy affected social activities and interactions. Individuals mentioned that they have had to reduce the rate at which they go out and socialize. They are unable to visit their friends and family as frequently as before due to the increased expenses associated with transportation.  

The impact of the fuel subsidy removal extends beyond individuals' personal lives; it has affected workplaces as well. Many offices have implemented duty rosters for their employees to reduce daily transportation expenses. This means that employees in some (government) organizations may have altered work schedules or reduced working hours to minimize the need for commuting. These measures aim to alleviate the financial burden on both the employees and the organizations they work for. These workplace changes may likely have a short-term negative effect on productivity.

  1. In your opinion, what are the long-term consequences of the fuel subsidy removal in Nigeria compared to the situation before the removal and what are the positive effects or benefits from the removal of the fuel subsidy?

The belief that the removal of the fuel subsidy will have detrimental consequences on the country's economy is shared by many individuals. If not managed properly, the removal can have far-reaching effects that impact various aspects of people's lives. One significant concern is the potential reduction in private vehicle usage. As fuel prices rise due to the removal of the subsidy, individuals may find it increasingly difficult to afford fuel for their vehicles. This can lead to a significant shift towards public transportation, such as commercial vehicles or even resorting to walking in worse situations. Moreover, the potential rise in transportation costs and the resulting financial strain on individuals can contribute to an increase in crime rates. There were also concerns about the breakdown of law and order due to the increase in economic hardship and financial burden.

CONCLUSION

Even though there are theoretical justifications for the President's decision to remove the fuel subsidy, existing conditions and the increase in the cost of living has made it difficult for households to cope, particularly those at the lower end of the income spectrum, that constitutes the larger percentage of Nigerians.

The removal of the fuel subsidy must be managed properly and the need to have a quick fixing of our refineries is most essential at this time. The government must also work to attract investment in the upstream sector of the Nigerian oil industry. Moreover, there is need for the government to immediately provide measures that cushions the short run shocks associated with the removal of fuel subsidy.

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Disclaimer: This information in this article is NOT investment advice. It is intended for information and entertainment purposes only.

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