Prof. Adeola Adenikinju of Department of Economics, University of Ibadan, has said available data on fuel subsidy showed that its payment was detrimental to the downstream sector and economy at large.
Adenikinju stated this at the 16th annual foundation lecture and 84th birthday anniversary of Dr Adebayo Akande, the founding Chairman of West-Midlands Communication Ltd., the operator of Splash and Lagelu FM Radio in Ibadan.
The 2023 anniversary lecture was themed: “Fuel Subsidy Removal – Causes, Impacts and Adjustment Responses.”
He said subsidy had done more harm than good with the collapse of the nation’s refineries, depots, pipelines, and dependence on trucks to transport fuel across the country.
Adenikinju said that the development led to massive fiscal losses and pressure on the exchange rate.
Adenikinju added that the macroeconomic impacts of petrol subsidy removal are not as large as most people fear.
He noted that fuel subsidy benefits the rich and drives unsustainable growth in petrol consumption.
According to him, Nigeria’s revenue receipts are being crowded out by debt servicing commitments as the country’s debt burden grows.
“In 2022, petrol subsidy was in excess of 80 per cent of total budget deficit.
“Available data has shown that Nigeria has saved over N540 billion in the first one month of the petrol subsidy removal.
“One of the effects of the petrol subsidy removal is the reduction in the incentives to smuggle fuel across the borders to take advantage of the relatively higher petrol prices in those countries.
“The Nigerian Midstream and Downstream Petroleum Regulatory Authority has estimated that the petrol subsidy has reduced by about 28 per cent.
“This reduction has come from both the domestic market and the smuggling market,” he said.
Adenikinju, however, urged government to provide short-term responses such as cash transfers to poor households, expansion of school feeding programs, provision of affordable public transportation and expansion of mass transit systems.
He also called for diversification of the economy through promotion of agriculture and agribusiness, development of solid minerals, investment in local refining capacity and promotion of alternative sources of energy.
“Government must build credibility and earn the trust of the public. This could be achieved by effective communication, and fidelity to implement announced palliatives.
“I believe that post-subsidy era will bring an influx of new private companies in the sector that will bring innovation, efficiency, competition, investment, new jobs, and that would pay billions of naira into government coffers as taxes,” he said.
Earlier, the former President-General, Central Council of Ibadan Indigenes, the father of the day, Chief Bayo Oyero, said that the fuel subsidy removal had caused a lot of discontents in the country and called for urgent response from the government.
Oyero noted that prompt response from government remains only way to answer so many questions being raised by Nigerians as a result of subsidy removal.
In his response, the celebrant, Dr Adebayo Akande, said that the anniversary lecture had exposed many hidden information about fuel subsidy and the need for its removal for the benefits of all citizens.
Akande thanked God for the privilege to touch lives and the grace of good health at 84.
