Almighty Fuel Subsidy: To be or not to be



In 2012, January 1 to be precise, the whole country was shut down by civil society groups, human rights activists, labour unions and the general public.

In what was referred to as the greatest standoff in labour unionism since the 1945 General Strike led by the Pa Imoudu of blessed memory. An attempt by the government to cut fuel subsidy that year led to what came to be known as the #OccupyNigeria protest.

Nigerians were outraged when in the early hours of January 1, 2012, former President Jonathan announced the removal of subsidy from petroleum products.


This New Year’s announcement meant that PMS, which sold for N65 a litre with subsidy, would go for N141; an increment of more than a hundred per cent.

This action translated into more than one hundred per cent increase in fares, food, rents and virtually all goods and services in Nigeria. This is because petrol is central to Nigeria’s economy and literally close to every Nigerian’s heart.

Expectedly, that announcement immediately drew Nigerians to the streets, sparking spontaneous protests across the country.

But it soon became clear that there was a need to drop the subsidy regime because facts came to the fore signifying that the regime was characterised by monumental fraud.

It was discovered that to benefit from the 2011 fuel subsidy largesse, some oil companies “manufactured” fictional oil ships (vessels) they claimed traversed seas and oceans of the world carrying imaginary petrol, with Nigeria the final destination of the product, by a Technical Committee set up by the Federal Government.

For supplying this phantom product to Nigeria, some seven companies pocketed a princely N13 billion naira from the 2011 fuel subsidy payments, the committee’s report, further revealed.


That was the scandal the then administration of Dr. Goodluck Jonathan saw, and deemed it fit to shut the subsidy corridor. Unfortunate, the generality of the nation did not understand the policy direction of the administration, and those that understood, swept the truth under the carpet because of political leanings, and so the mega strike of January 1 to 11, 2012.

As fate would have, the administration of Jonathan was voted out in 2015, paving way for the opposition All Progressives Congress (APC), who, in their various individual factions and parties then, vehemently opposed the subsidy removal proposal.

Now, on the seat of power, it was easy to behold the rot that characterized the subsidy regime. As a result, the administration of President Mohammadu Buhari, which comprises all the opposition fragments of 2012, took a far reaching decision to tow the line of Goodluck Jonathan, and scrap the subsidy regime. This was in December 2015.

With the populace shouting blue murder because the decision was the major reason Jonathan was painted black, major stakeholders attached to the party and the administration spoke in defence of the subsidy removal, and why they opposed it previously.


The National Leader of the governing All Progressives Congress and former Governor of Lagos, Asiwaju Bola Tinubu, joined the call for the government to scrap the subsidy regime.

Tinubu, who had opposed the removal of the subsidy under the administration of former President Goodluck Jonathan, said subsidy was originally a good idea, but it had since been “perverted”, urging the government to divert the money it is currently paying on subsidy to other social programmes and infrastructure that would have more rewarding impacts on the people.

While speaking at the 10th memorial anniversary of left-wing politician and scholar, Bala Usman, in Kaduna, he said: “In a perfect world, I wish we could sanitize the subsidy regime and thus continue (with) it. However, I have reached the conclusion that there are too many demons in the system for this hell to be converted into good earth let alone heaven.”

An oil industry stakeholder, however, said that it was unfortunate that the former did not notice the ‘demons in the system’ when he opposed the removal of subsidy during Jonathan’s regime, adding that everything in play is the demonstration of political intrigues at work.


“All these are political maneuvers at work, otherwise Bola Tinubu should have noticed the demons in the system when he and his people shouted down the former administration, which attempted to implement it. All these are just a way of saying only the party I belong to can do the right thing,” the stakeholder who craves anonymity said.

Speaking also on the scrapping of the subsidy regime, better known as Petroluem Support Fund, the Minister of State for Petroleum, who also doubles as the Group Managing Director of the Nigeria National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu, said that it is highly uneconomical to continue to subsidise fuel in the country.

Speaking to journalists at the Port Harcourt refinery in December 2015, Kachikwu said the government could no longer pay the subsidy due to the fraud tainting the scheme.

He added that the government could no longer afford the payment due to the dip in its revenue, caused by the drop in crude oil prices. He said a new pricing template he signed off earlier effectively removed the payment of subsidy on petrol and that oil marketers would be informed of the development in the coming days.

“I signed off on it yesterday (Thursday). I imagined that in the next couple of days, the marketers would get advice on that. The nice thing about the PPPRA, where I signed up on it yesterday is that the price will be far below N87,” he said.

“So for the first time, people will understand that the pricing modulation I was talking about is not a gimmick. It is for real. We have gone to find out how we will be able to fluctuate this market to reflect what the reality of the crude market is. The objective is that one, we cannot afford to continue to subsidise.

“We can’t even understand where those subsidies were going to. There are a lot of fraud elements in it so we need to cut that off,” he added subsequently, subsidy on petrol was stopped in January after the review of the pricing template of the product by the government.

However, with all the Federal Government recommended, it was reported recently that the government has recommenced the payment of subsidy on petrol as it subsidised the commodity by N5.84 for every liter of premium motor spirit consumed in Nigeria. This is against the original agenda of using whatever fund accruable to subsidy payment to provision of infrastructure.

Queue 1

The announcement on fuel subsidy removal came two days after the Nigerian Labour Congress threatened it would vehemently oppose any cut on the subsidy regime. At the end of its Central Working Committee meeting in Abuja, the NLC said the discordant pronouncements from government officials on plans to cut subsidy was creating panic and confusion in the system, even as it reaffirmed its opposition to any fuel price increase.

Some other companies, not wanting to create fictional vessels, decided to space- travel existing ones; such that real vessels, which were definitely in countries like China and UAE, were purported to have discharged petrol into storage depots in Nigeria at the exact time they were in those other countries. The 11 companies involved in this category of fraud pocketed N21 billion from the 2011 subsidy payments, the report said.

Sources in the oil industry revealed at the time that those companies were able to perpetuate the crime with the help of field officers of the Petroleum Products Pricing and Regulatory agency (PPPRA) and the Department of Petroleum Resources (DPR), men of the Nigerian Navy, Nigeria Custom officers, banks and others involved in the various stages of fuel importation.


The companies and their owners are still being prosecuted by the Economic and Financial Crimes Commission.

This brings to question whether the proposed subsidy removal can actually be realized against the backdrop that there are so many forces militating against its removal. This includes the so called oil cabal, which holds the country by the jugular with their ability to withdraw their services whenever they please. Again, are the tanker drivers, whose activities revolves round bringing in the imported fuel from the deport, as well as the so called vandals.

In an interview with the Managing Director, Hitro Trading and Energy Service Limited, Mr. Ugochukwu Ajuonuma, he revealed that there is so much about fuel subsidy removal than meets the eye. He told The Boss that the possibility of the subsidy being completely removed from the off shore oil marketing, is very remote, considering the fact that the modalities to sustain the economy, vis-à-vis the petroleum sector, have not been put in place. He argued that the Federal Government has no business discussing removing oil subsidy if something as tangibles as refineries has not become a lexicon in the dictionary of the Nigerian economy, especially as it pertains to oil.

“Subsidy, by every indication, supposed to be the best thing to happen to the economy because it would make for free market operation where every marketer or dealer will fix his own price, and reach out to his own distinct customers, but it is not so because the modalities that should be in place before this happens is far from happening,” he said.

Mr. Ajuonuma hinted that a country that cannot refine its own oil cannot be talking about subsidy. He therefore said that the first port of call in making the subsidy regime work is by rehabilitating the nation’s refineries, and making them functional.

“The refineries must be made to work so that removing subsidy can work, otherwise subsidizing the price of fuel, which the Federal Government is doing at the moment at N5.87 per litre will continue.”

He reasoned that far from returning refineries, there is also the need to provide adequate security for the pipelines, which has hitherto remained under the mercy of vandals, saying that the Navy and other marine agencies as well as those saddled with the responsibility of maintaining the safety of oil installations should be made to step up their game, and do the needful. He however, regretted that the lwa enforcement agencies have somehow been compromised

“Apart from putting the refineries in order, there is the need to make the law enforcement agencies live up to expectation. You see most of them have been compromised as a result of greed and low standard of living,” he said.


On whether there is a possibility that after all said and done, the subsidy regime as being touted by the Federal Government will see the light of the day, Mr. Ajuonuma said:

“You know that this (Subsidy) is where the marketers and importers eat from or survive from. It is not certain they will allow removal of subsidy to take place, because it will seriously affect their means of livelihood negatively. They will sabotage the effort. The truth is this, most of them don’t even import anything and still collect the government money. The system has become so porous that they can get away with what they are doing, and that is what the present administration is trying to stop. The situation aptly explains the present fuel scarcity because most of them have refused to import, and those that imported have refused to bring them in, making the government to bend backwards and pay the subsidy they recently outlawed.”

Many other stakeholders, who spoke to The Boss, agreed with Mr Ajuonuma, saying the provision of a functional refinery and a free market economy will make for the desired removal which the country clamours for.

A staff of one the major oil marketers, who craved anonymity, stressed that licences should be issued to other citizens, who have interest in establishing refineries to do so, thereby taking the stress off the Federal Government, and demystifying the invincibility of the so called oil cabals.

“The Federal Government should issue licences to credible people who wishes to set refineries like Aliko Dangote and others. The effort will free the government, and reduce the ability of the oil marketers in holding to country to ransom for every little thing. At this level, prices will be diverse, and citizens can have a pick or choice,” he said.

Mr. Ajuonuma also spoke against the backdrop of the Minister of State for Petroleum’s assertion that long queues occasioned by the scarcity of fuel will be a thing of the past by April 7.


“The way things are, that is almost impossible. The Minister succumbed to pressure in making the pronouncement. In fact, he got it all wrong as it is difficult for fuel to be available within that short period of time after the damage of many weeks of scarcity,” he said.

Mr. Ajuonuma however, sues for patience among the populace, saying the government should be given more time to put the guts together.

The debate continues to rage as to the possibility of the subsidy to be a thing of the past in the Nigerian economic system as the refineries, which should be the turning point, is not in place; the vandals who are sabotaging pipeline installations are still romancing with the law enforcement agents and the almighty oil cabal are still dictating the pace. Time will tell.


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