The term ‘subsidy’ has gained significant attention in the early days of President Tinubu’s administration.
The President’s commitment to eliminate subsidies has sparked discussions about the implications of such move. In the oil and gas context in Nigeria, subsidy refer to the financial burden shouldered by the government to provide affordable petrol to the public.
However, what began as a measure in 1973 has now become a massive financial burden, costing the country trillions of naira annually.
Despite the substantial fund channeled to it, there is little evidence to suggest that the majority of Nigerians benefit significantly from these subsidies. Instead, a small portion of the population, including the wealthy and neighboring countries involved in illegal trade, primarily consumes the subsidized petrol.
This situation has resulted in Nigeria indebting itself to fuel the vehicles of the elite and unintentionally provide cheap petrol to neighboring countries. The payment process is plagued with corruption, leading to the enrichment of a few at the expense of the majority.
In 2023 alone, the Nigerian government allocated a considerable amount of money to subsidize fuel, surpassing the funds allocated to other revenue-generating projects. This situation has reached a point where the government struggles to pay its staff salaries while devoting significant resources to fuel subsidies. However, it is clear that preserving the lifestyle of the elites or providing cheap petrol to non-Nigerians should not outweigh the country’s future development.
The economic principle of opportunity cost highlights that funds allocated to subsidies could be better invested in infrastructure, education, healthcare, and other amenities that directly improve the lives of citizens. President Tinubu recognizes the need to redirect these resources into areas that benefit the most Nigerians and ensure the country’s survival, particularly in times of global economic uncertainty.
The oil subsidy has proven to be ineffective, depleting trillions of naira without significant results. It contributes to brain drain and immigration wave as young Nigerians seek better opportunities abroad. Nigeria’s progress will remain elusive if the government continues to prioritize subsidies over crucial investments.
To foster growth, it is imperative to eliminate the heavy burden of oil subsidies and focus on skills development, infrastructure improvement, and expanding economic opportunities.