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Home Business News Politics

Why removal of fuel subsidy may be a “fraught process”

Nairametrics by Nairametrics
May 20, 2015
in Politics, Spotlight
Why removal of fuel subsidy may be a “fraught process”
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Nigeria is currently facing one of the most grueling fuel crisis in recent times and things are not looking to get any better. This has turned many Nigerians who were previously against removal of fuel subsidy into vehement supporters for the removal. Some Nigerians believe this is probably the best time to do it and an opportunity to end the era of fuel subsidy and that the cabal reaping from fuel subsidy scam is eliminated once and for all.

Unfortunately, even the removal of fuel subsidy and the full deregulation of the downstream sector may not provide the respite and elimination of corruption many anticipate. Who else to explain better but the CEO of Sahara Group, one of the largest players in the downstream space. According to an article of Reuters,

Mr Tonye Cole explained that Nigeria’s crippling fuel shortages are unlikely to ease any time soon and much-needed deregulation of the subsidised market would be a fraught process, the chief executive of energy company Sahara Group said on Wednesday.

Cole said the process of freeing the market would be fraught as adjusting to higher pump prices would be painful for about a year for the average Nigerian, particularly with a weaker currency.

Even for importers, the process of equalising gasoline station prices with import costs would be chaotic, as the many agencies that regulate every minutiae of the supply chain would have to be dismantled.

So on the back of this statement it appears the removal of fuel subsidy may just be a recipe for short term pain for many Nigerians. A lot of unsuspecting Nigerian hoping that the removal of fuel subsidy will provide respite and address the current crisis in the industry may just be made to suffer even much more before things can start to look better.

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Also, the removal of fuel subsidy even if it doesn’t do any of the above is likely to take the product out of the reach of many Nigerians. Nigerians may end up buying fuel at N200 per litre and could be a source of grievance with the incoming administration. Add that to the poor power supply in the country and what you could get are even more angry Nigerians.

 

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Nairametrics

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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Comments 3

  1. Ekwueme Mike Anyadibe says:
    May 21, 2015 at 5:10 am

    Make them remove the damn subsidy….we are already paying for petrol at blackmarket prices…we want ‘market’ price !!!!

    Reply
  2. Dare Akinola says:
    May 21, 2015 at 3:24 pm

    That’s an analysis completely based on LIES. The process of fuel importation and subsudy removal is so straight-forward an objective a primary school pupil with determination can achieve.

    Cut this wicked middle-men(fuel importers)out of the supply chain and half our problem is solved. Get NNPC to be more efficient and in complete control of fuel importation, turn around our refineries within the shortest possible period while at the same time allowing them refine as much as they can for the domestic market, and finally source for cost effective and value driven crude for refined product deals.

    That will stabilize the industry in the medium term and over the long term, our supplies will be steady on cheaper prices by the time our refineries start pumping locally. How difficult if that?

    Reply
    • Nairametrics says:
      May 21, 2015 at 4:07 pm

      Interesting. Coming from a major downstream player, its difficult to view it as lies.

      Reply

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