Fuel subsidy removal and sustainability question

Sir: The issue of fuel subsidy removal is not peculiar to the Nigeria economy; rather, it has drawn attention on a global scale due to its socioeconomic effect and sustainability concern.

Although subsidies are meant to benefit consumers by keeping low prices, they are expensive. According to the IMF report of 2022, a whopping $5.9 trillion, or 6.8 per cent of GDP, went to fuel subsidies in 2020. Also, the prediction that this figure would rise to 7.4 per cent of GDP by 2025 is of great concern.

Its socioeconomic impact on Nigeria has been the subject of numerous professional economic debates, but little attention has been paid to sustainability concerns. One of the most important steps toward lowering greenhouse gas emissions and controlling climate change is the removal of fuel subsidies.

However, this must be carefully studied to prevent unexpected outcomes such as price hikes that may damage the most vulnerable members of society and result in civil unrest.

On May 29, 2023, the newly inaugurated President Bola Ahmed Tinubu (PBAT), who cited the unsustainability nature of fuel subsidy, announced its abolition in Nigeria. This announcement has generated lots of mixed reaction from citizens. While some stakeholders expressed support on the matter, some have reservations about it.

It is crucial to assess the potential impact from a sustainability perspective as the Nigerian people wrestle with the economic and social consequences of this decision. This letter seeks to clarify the effects of Nigeria’s removal of fuel subsidies and how it relates to the goals of sustainability.

Foremost in Nigeria, fuel subsidies have significantly increased the government’s spending, causing budget deficits to grow, and making it more difficult to allocate funds to vital industries like healthcare, education, and infrastructure. The government can address needs of sustainable development and improve fiscal sustainability by reallocating money that was previously designated for subsidy.

Secondly, eliminating fuel subsidies is in line with the international push to mitigate climate change. Nigeria can reduce greenhouse gas emissions and mitigate the effects of climate change by lowering its reliance on fossil fuels. This decision is essential to fulfilling the nation’s obligations under the Paris Agreement and achieving the transition to a more sustainable energy system.

In addition, Nigeria now has the chance to quicken the process of switching to renewable energy sources, thanks to the elimination of fuel subsidies. The nation may promote the emergence of clean and sustainable energy systems by removing price distortions and encouraging initiatives in renewable energy.

Furthermore, the potential societal effects of eliminating fuel subsidies must be carefully considered. To make sure that the most vulnerable groups in society are not adversely affected, mitigating measures should be put in place. The government may address social inequities, improve access to essential services, and foster inclusive development by diverting the money saved from subsidy removal onto targeted social investment.

In conclusion, the elimination of fuel subsidies offers a special chance to harmonise economic, social, and environmental goals – “Triple Bottom-Lines” with a focus on sustainability. Nigeria can strengthen its resilience and advance sustainability goals by redirecting the subsidy funds to projects and promoting sustainable development.

Jimoh Ibrahim Bamidele wrote from Federal Polytechnic, Ilaro.