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The origins of Nigeria’s fuel subsidy system have been traced back to the military administrations of General Yakubu Gowon and General Olusegun Obasanjo, according to a recent statement from the Independent Media and Policy Initiative (IMPI). The group claims that these leaders institutionalized the subsidy during a period when the country’s economy was thriving, using it as a temporary measure to address rising global oil prices.
During a press briefing in Abuja, Chief Niyi Akinsiju, the chairman of IMPI, elaborated on the history and purpose of the fuel subsidy. He explained that the subsidy was introduced as a fiscal response to an oil price surge triggered by the Organization of Petroleum Exporting Countries (OPEC). At that time, the subsidy was seen as a short-term solution aimed at preventing a significant rise in fuel prices for Nigerians, allowing the government to fix and regulate prices to shield citizens from global market volatility.
The fuel subsidy policy, however, was never meant to be a permanent fixture of the Nigerian economy. Akinsiju pointed out that, in theory, subsidies should be rolled back during economic downturns due to the distortions they create in the market. Yet, over the years, the subsidy system became deeply entrenched, almost inseparable from the country’s economic fabric, as political and public resistance grew against any attempts to remove or adjust it.
The introduction of the subsidy led to some initial price adjustments in fuel. Under General Gowon, the price of petrol increased by 40%, from six kobo to nine kobo per litre. Similarly, under General Obasanjo, it surged by 70%, rising from nine kobo to 15.3 kobo per litre. These adjustments were reflective of the evolving economic realities of the time.
IMPI argues that the creation of subsidies was feasible due to the abundance of fiscal resources during the oil boom years. The policy was envisioned as a way to redistribute Nigeria’s wealth more equitably, ensuring that the broader population could benefit from the country’s increasing revenue. However, over time, as fiscal constraints tightened and global oil prices fluctuated, maintaining the subsidy became increasingly unsustainable.
Akinsiju expressed concern over the current reaction from labour unions, particularly the Nigeria Labour Congress (NLC), regarding the government’s recent decision to remove the fuel subsidy. He criticized these groups for their consistent opposition to subsidy reforms, noting that most Nigerians were already in favor of its removal before 2023. He emphasized that the uproar over the fuel price increase is a recurring pattern, with unions traditionally placing the blame on the government without considering the changing economic dynamics that led to the subsidy being introduced in the first place.
IMPI’s stance is clear: the current criticism and unrest surrounding the removal of the fuel subsidy should cease. Akinsiju highlighted that the subsidy has become a contentious issue for decades, despite being out of step with modern economic realities. According to him, the time has come for Nigerians to accept the necessity of moving away from a policy that was originally designed for a different era.
In conclusion, Nigeria’s fuel subsidy system, though originally created to ease the pressure of rising global oil prices, has evolved into a source of economic strain. While it once served as a mechanism for wealth distribution, the subsidy has now become an unsustainable fixture in the nation’s economy, a fact that IMPI and other experts believe should lead to its permanent removal.
