The Federal and State Governments may need to do more in providing palliatives as Nigerians struggle to survive the removal of subsidy on the premium motor spirit (PMS), KINGSLEY JEREMIAH writes
Unlike countries with diversified energy sources or reliable electricity, most Nigerians rely on Premium Motor Spirit (PMS) for transportation and off-grid electricity. This high demand creates a spiral effect when there’s a challenge with the supply or price of PMS.
Besides, the immediate inflationary consequences of subsidy removal have also been a key concern for stakeholders since PMS is an essential commodity.
The PMS subsidy existed in two forms in Nigeria. The first is the payment of the difference in the actual pump price of PMS, which is arrived at after calculating the landing cost and the extant margins. The other is the cost of transportation paid on every litre to ensure that the price of PMS is consistent across the country. While the citizens through the government pay for the difference, the transportation component is burned directly by individuals.
The emergency of President Bola Tinubu has brought an end to the schemes and the pump price has moved from N195 per litre to about N580 depending on the state of the consumer.
With an economy already weakened by COVID-19 and exacerbated by Russia and Ukraine war as well as other corrupt-induced challenges in Nigeria, the prevailing development has forced Nigerians to find their balance and confront this reality amidst high unemployment, ravaging poverty, dismal purchasing power and an existing energy crisis.
These worsening conditions made the call for the federal and state governments to apply human face in urgently dealing with the consequences of the subsidy removal germane.
Ideally, the past administration was expected to properly plan mitigating measures that would enable the citizens to properly survive the harsh implications of the removal of subsidy but it was until the action was taken before a few states like Edo and Kwara reduced working days and increased workers salaries while the Federal Government holds talk with labour unions.
The Oyo State government as well as Rivers have disclosed plans even as the National Economic Council (NEC) is expected to roll out plans to mitigate the suffering of the masses.
In the Federal Capital Territory (FCT) and most states in the country, especially major cities like Lagos, Kaduna, Kano and Port-Harcourt, mass transit as well as railway would have been a better option to immediately provide alternatives for citizens.
Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN), Isong Clement, believes that providing such services could immediately reduce the challenges faced by the citizens.
Currently, in places like the FCT, most people paid over four times what they used to pay for transportation. For instance, a trip to the airport, which was about N3000 on an e-hailing application, is now about N10,000. Clement believes that the railway line, which connects the airport to the Central Business District could provide a succour.
According to him, mitigating the impacts of the subsidy removal should not be a priority for the Federal Government alone but also for the state.
Instead of direct cash transfer, he believes that all tiers of government should also support the agricultural sector and ensure the provision of funds to the citizens.
While citizens themselves must devise means to reduce their cost, the government needs to revive their moribund mass transit schemes and inter-state transportation companies, which can be subsidised for citizens.
President, the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA), Bennett Korie, asked the government to address the poor road network in the country, adding that the fund, which should have been expended on subsidy should be used in fixing the road network in the country.
According to him, the rehabilitation of the government refinery has lingered so long and must be urgently fixed as the country can not rely on the importation of petroleum products.
He kicked against the direct transfer of funds to Nigerians as a palliative for subsidy removal, asking the government to instead fund the agricultural sector to beat down the price of food.
For over four years, the Federal Government only paid lip service to the plan to diversify energy sources and provide infrastructure for compressed natural gas and liquefied petroleum gas as a cleaner fuel for road transportation. With the subsidy gone, the state governments must also find a way to domesticate this plan.
Some stakeholders have also called for tax incentives, duty waivers, and low-interest loans to encourage solar and other renewables while a similar approach can be adopted in expanding the CNG and LPG value chain.
While this is in place, training programmes and schemes could be implemented to equip mechanics and technicians with the necessary skills to service and maintain CNG and LNG-powered vehicles.
Chief Executive Officer (CEO) of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the current increase is quite high.
According to him, the shocks on citizens were enormous as well but the pain is the inevitable cost of reforms.
“And we need reforms to prevent the collapse of the economy. Things have to get worse before they get better. It would be painful initially, but it would progressively get better. As the supply side response improves, the prices will moderate,” he stated.
Yusuf wanted the government to urgently put immediate and short-term measures in place to mitigate the pains of the sharp increases in transportation costs on the citizens.
“Food and transportation account for over 50 per cent of the household budget of the poor. Something urgent needs to be done.
“Such measures should focus on reducing the cost of food, provision of cheaper public transportation options, improving power supply to reduce demand for fuel for electricity generators, incentives to promote the use of autogas, reduction in import tariffs for intermediate products for food processing companies, eliminating taxes and levies on all agricultural inputs to boost food production and reduction in import tariffs on mass transit buses, among others,” he stated.
PricewaterhouseCoopers’s Partner, Energy, Utilities and Resources, Habeeb Jaiyeola, said: “To ease this impact, the Federal Government should focus on accelerated infrastructure development to improve multiple transportation options to reduce dependency on personal transporting means. The subsidy removal also comes at a time to enable businesses like the Dangote refinery to operate in a fully deregulated sector. This also helps to further reduce the cost of white products and reduces the impact of subsidy removal.
“Despite the subsidy removal, the NMDPRA needs to continue to monitor the price of the products to ensure reasonable prices are charged by the sector players. The role of the regulator remains extremely important in a fully deregulated sector,” Jaiyeola said
