For decades, the Nigerian government has been saddled with the responsibility of subsidizing fuel and fixing the retail prices of fuel. Despite the efforts to reform the subsidy placed on fuel, Nigeria has never been able to successfully achieve this removal. Nigeria, being the biggest producer of oil in Africa, has come under heavy attacks from World Bank and International Monetary Fund for the huge financial burden that it Carrie’s, in a bid to provide fuel subsidy, when this revenue could be invested into facilitating other services that would further enhance the country’s economic growth.
The Federal Government has however decided to halt its payments for fuel subsidy after June 2023. This decision is thus set to have a significant effect on many businesses operating within the country, the supply chain especially. The stop in subsidies will inevitably cause a rise in the cost of transportation and energy which will inadvertently cause manufacturers and distributors to increase the prices for their goods and services. This is predicted to remotely cause a decrease in demands for services and reduced sales, affecting the country’s economic growth. However, this could be a net positive, if handled properly.
Fuel Subsidy can stimulate economic activities & protect local businesses.
In truth, fuel subsidies are not a bad idea, as they play a major role in stimulating the economic activities and protecting the domestic economy by reduction of their energy revenue. Whether directly or indirectly, this is only typically achieved by the government giving financial support to reduce fuel prices. On the negative side, however, this can also catalyze waste and corruption. Between 2017-2021, the Economic and Financial Crimes Commission allegedly recouped about N13 billion as proceeds from illegal payments transacted under the subsidy regime. Though a painful financial blow, halting subsidy can enhance government’s finances, as well as ensuring access to boil products needed for their operations.
One major concern raised against the fuel subsidy removal is the lack of trust in the government in allocating the recovered gains to further develop the economy. Many people have been critical about the high cost of governance and the lackluster state of public infrastructures. Business wise, the malfunctioned oil refineries in the country makes the economy so vulnerable to the unpredictable global supply chain, as Nigeria imports all its refined oil products. Thus, a structured plan as to how these gains will be reinvested into the economy. Although the government has stated its position as to reviving the country’s refineries, it would be best to privatize it to give space for more revenue allocation. The government is also said to be exploring investing in Dangote Oil Refinery, the biggest in Africa and this gesture, it is believed, will help protect businesses.
Unstable energy supply also affecting supply chain businesses in Nigeria.
Another point for investors in the supply chain is the feeble condition of the public transport infrastructure in the country. In 2020, the Financial Times’ survey showed that transporting goods from the port to the main land, which is about 20km, cost about $4000, similar to the fee charged for Nigeria from China. With subsidies taken away, the coupes revenue can be used to facilitate the building of more ports, roads, train networks and bridges to reduce the cost of operations of most businesses within the supply chain.
Energy supply is another factor affecting supply chain businesses in Nigeria. As a result of the recurrent power shortage, most businesses have had to solely rely on oil generators for their energy. Last year, the price of diesel increased by 187.69 percent, according to the National Bureau of Statistics. This, in turn, caused a surge in the cost of business operations. One efficient strategy that the government can enact is the provision of subsidy for companies that invest in fuel-efficient sources for the generation of energy.
Reform will enhance the transition into clean energy sources.
However, one important benefit of the fuel subsidy policy reform is the ability to enhance a transition into cleaner energy sources, which would also enable supply chain businesses to enhance their sustainability practices. Sectors like agriculture, logistics and manufacturing would hugely benefit from this transition to clean energy like solar. Looking forward, while the global effects of a global chain crisis caused by Covid-19 and the Russia-Ukraine war have hugely affected the global economy, Nigeria must commence strategies to ensure a removal of the fuel subsidy.
Related Link
Central Bank of Nigeria: Website
Ending fuel subsidy to boost supply chain. – Federal government determined to stop fuel subsidy after June 2023. – Express your point of view.
We need to end fuel subsided as soon as possible. Even if it will make us buy fuel at higher cost, we are already buying it at higher cost. So nothing has generically changed at all.
The Nigerian government has been given the role of determining the retail pricing of fuel as well as the subsidizing of fuel prices.
Nigeria has never been able to successfully achieve the abolition of the fuel subsidy, despite the country’s several attempts to modify the subsidy system.
As the country that produces the most oil in Africa, Nigeria has been the target of harsh criticism from the World Bank and the International Monetary Fund due to the enormous amount of debt that it is currently carrying.
Because of this, this decision is likely to have a substantial impact on a large number of enterprises operating within the country, particularly those involved in the supply chain.
Breakfast’s calorie-burning benefits have been studied extensively and are especially significant for people who go for long stretches without food.
It has been reported that the government is considering making an investment in the Dangote Oil Refinery, which is the largest in Africa. It is anticipated that this move will assist in the protection of enterprises.
As the conflict between Russia and Ukraine has had a significant impact on the economy of the entire world, Nigeria needs to get moving on devising a plan to get rid of its fuel subsidies as soon as possible.
Truthfully, This is a proposal.fuel subsidy will make room investment and look into facilitating other services that would further enhance the country’s economic growth. It will actually pave way for the attention of other services.
In Nigeria, the federal government is responsible for both setting the retail price of gasoline and selecting whether or not to subsidize gas prices.
As quickly as possible, we must put an end to fuel subsidization. It might force us to pay more for gas, but we’re already paying more. Therefore, in a broad sense, nothing has altered.
Fuel subsidy need to be stop the price is just getting high necessary thing to be done so fuel subsidy can be stopped
Despite numerous attempts to alter the subsidy structure, Nigeria has never been able to properly eliminate the fuel subsidy.
Fuel subsidy has been a parasite eating deep on the Nigeria economy and all the issue surrounding it has been opaque and shady without clear direction how the process is.Everything that is needed to be done should be done to regulate the system.
the Nigerian government has been saddled with the responsibility of subsidizing fuel and fixing the retail prices of fuel. The fact the country Nigeria is have oil yet Nigeria vis misusing it, imaging the kind of debt Nigeria is owing
Nigeria has made numerous attempts to change the fuel subsidy system, but has never been able to do so with any degree of success.
Nigeria needs to begin working on developing a strategy to eliminate its gasoline subsidies as soon as feasible because the conflict between Russia and Ukraine has had a huge influence on the economy of the entire world.
If the government continue to release fuel subsidy, it will only continue to breed corruption in the land. Ending fuel subsidy is the only solution to boost supply chain provided that the government judiciously use the money.
Fuel subsidy shouldn’t be allowed to continue because some cabals are just using the money for there private businesses, feeding fat on the weaknesses of the nation. Government should end subsidy and diver the fund to other area of the economy that will be benefiting to everyone.