AN ASSESSMENT OF PUBLIC PERCEPTION ON THE ISSUES ASSOCIATED WITH 2023 FUEL SUBSIDY REMOVAL IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1  Background of the study

One of the pivotal concerns pertaining to the energy market in developing nations that export oil is the substantial prevalence of subsidies on petroleum goods and the suboptimal efficacy in energy utilization.The reform of fuel subsidies is widely seen as a potential avenue for strengthening public finances and promoting sustainable economic growth.  Despite the collective endeavour of succeeding administrations, the matter of oil subsidy continues to persist as a complex socio-economic policy concern in Nigeria (Adekunle, 2022). A fuel subsidy refers to the financial burden shouldered by the government in order to mitigate the adverse effects of elevated pump prices of petroleum products on the general population. According to the International Energy Agency (IEA, 1999) cited in Antimiani, Costantini,  & Paglialung (2023), a fuel subsidy is characterized as a governmental measure primarily targeting the oil industry, which serves to reduce the cost of energy production, increase the price received by energy producers, or decrease the price paid by energy consumers. Similarly,  Ovaga and Okechukwu, (2022) stated that a fuel subsidy refers to a governmental policy that involves providing a reduction in the market price of fossil fuel, resulting in customers paying a lower amount than the prevailing market price for fuel. When subsidies are implemented, customers are able to purchase petroleum products at a price per litre that is lower than the prevailing market price. Arguably, Ozili and Ozen, (2021) mentioned that while the government's supply of welfare is praiseworthy, its economic impact may be limited.

On the other hand, Nigeria is a nation that possesses abundant material resources, with particular emphasis on its significant reserves of oil and gas. The nation holds over 28% of Africa's confirmed oil reserves, ranking second only to Libya. Additionally, it stands as the primary producer of crude oil in the area, with a daily production of 2.4 million barrels in 2010, accounting for approximately 24% of the continent's total petroleum output (Gidigbi & Bello 2020). Despite the substantial wealth generated by Nigeria's oil industry, there is a lack of correlation between this economic advantage and the overall well-being of the nation's common populace. Moreover, this disparity has failed to manifest in significant economic growth for the country.  According to Ibanga (2011) cited in, the supply of refined crude oil in the nation has significantly declined due to several factors such as inefficiency, corruption, abuse of natural monopoly rights, mismanagement, smuggling, bureaucratic bottlenecks, and excessive subsidies. The issue of fuel subsidy has sparked much controversy due to its substantial magnitude and its implications for both the well-being of residents and the budgetary stability of a nation. According to the International Energy Agency, the predicted worldwide fossil fuel subsidy has experienced significant growth, increasing from $325 billion in 2018 to a substantial amount of $1 trillion in 2022. The aforementioned quantity exhibits a notable disparity when compared to the expected value of worldwide assistance, which stood at $204 billion in 2022, and surpasses the collective fiscal income of poor nations. The aforementioned circumstances have prompted demands for the elimination of worldwide subsidies for fossil fuels, with the intention of reallocating the resulting financial resources towards aiding impoverished and vulnerable populations requiring humanitarian support inside developing nations (Couharde and Mouhoud, 2020).

Coherently, fuel subsidies were initially implemented in Nigeria during the 1970s in direct reaction to the oil price shock experienced in 1973. In 1986, a partial removal of fuel subsidies took place. Subsequently, fuel subsidies have been implemented. In the year 2012, Kyle (2018) observed that the government implemented a sudden removal of fuel subsidies. This act resulted in widespread protests, with the primary objective of urging the government to reinstate the subsidy that had been rescinded. As a result of the extensive demonstrations, the administration proceeded to reintroduce the fuel subsidy in 2012. Subsequently, the disbursement of fuel subsidies in Nigeria has experienced a substantial increase. Although  previous administration made an attempt to remove the fuel subsidy. It is a watershed moment in Nigeria's economic, social, and environmental history that the Tinubu-led administration has declared the elimination of the fuel subsidy in 2023.

1.2 Statement of the problem

            The discontinuation of the fuel subsidy in Nigeria in 2023 is a significant turning point in the country's economic, social, and environmental development. The aforementioned policy change possesses several repercussions that need thorough examination in order to fully grasp its extensive ramifications. The withdrawal of subsidies, motivated by the goal of aligning with international efforts to reduce fossil fuel subsidies and improve fiscal sustainability (Al Jazeera, 2023), poses a multitude of obstacles. One of the primary difficulties is the possibility of intensifying socio-economic inequality, since the elimination of subsidies may result in higher fuel costs and therefore elevate the overall cost of living. The issue at hand resonates with the argument put up by Ude (2023), which underscores that the removal of subsidies, although potentially advantageous in the long run, might impose financial burdens on households, especially those who are already marginalised.The intricate nature of the problem is amplified by the dynamic interaction of economic, political, environmental, and sociological elements. The cessation of the fuel subsidy in Nigeria in 2023 poses a complex issue marked by complicated interconnections among economic feasibility, social fairness, ecological sustainability, and political steadiness.

The existing body of literature in Nigeria presents a diverse range of findings about the impact of fuel subsidies. Several studies have examined the implications of fuel subsidies, revealing both positive and bad aspects. One perspective emphasises the advantages of fuel subsidies and emphasises the need for transparent administration. Conversely, another viewpoint underscores the adverse effects of fuel subsidies and advocates for their elimination. Omitogun et al (2021) demonstrate that the elimination of fuel subsidies has the potential to decrease carbon emissions within the Nigerian economy. Adekunle and Oseni (2021) suggest that the elimination of fuel subsidies has the potential to mitigate the increase in carbon emissions by promoting energy conservation practises, notwithstanding the potential consequence of elevated energy costs. Asare et al. (2020) present a case advocating for the elimination of fuel subsidies, contending that the resulting revenue could be utilised by the government to promptly address the COVID-19 crisis through immediate interventions. Additionally, this revenue could facilitate the reallocation of resources towards more productive expenditures, thereby promoting long-term post-COVID recovery and resilience (Ozili and Arun, 2023). Other research illustrate the impact of fuel subsidy elimination. According to Umeji and Eleanya (2021), the authors contend that despite the implementation of fuel subsidy in Nigeria, the country's oil wealth has not resulted in an enhanced quality of life for its citizens. They further assert that the removal of fuel subsidy could potentially lead to significant repercussions, which can be alleviated through governmental transparency in allocating the funds saved from the elimination of fuel subsidy towards infrastructural advancements. According to Ovaga and Okechukwu (2022), the presence of fuel subsidies in Nigeria has been identified as a catalyst for corruption. This is attributed to a faction of individuals who actively impede the operations of established refineries and hinder the establishment of new refineries in the country. By perpetuating the importation of fuel, these actors ensure the continuation of fuel subsidies, primarily driven by their self-serving interests. According to Omotosho (2020), the elimination of fuel subsidies in Nigeria results in increased macroeconomic instability due to the escalation of energy costs and inflation.

            Despite these evidence in the literature, there is little or no discussion on public perception on the issues associated with 2023 fuel subsidy removal in Nigeria. The way the fuel subsidy was removed, without first providing some palliatives, led to controversy about how the fuel subsidy removal would affect the Nigerian economy and Nigerians. Therefore, there is a need to identify and understand the issues associated with fuel subsidy removal in Nigeria. Upon this premise, the study is conducted

1.3  Objectives of the study

The objective of this study is focused on public perception on the issues associated with 2023 fuel subsidy removal in Nigeria. . Other specific objectives includes:

i.          To examine if  the removal of fuel subsidy have any effect on the economic condition of the country.

ii.        To ascertain if the capacity level of refineries can meet the nation’s domestic demand for oil.

iii.      To establish whether there are significant issues associated with fuel subsidy removal in Nigeria.

iv.      To assess public prception on the gains and the pains of subsidy removal in Nigeria.

1.4       Research Questions

i.          Does the removal of fuel subsidy have any effect on the economic condition of the country?

ii.        Can the capacity level of refineries c meet the nation’s domestic demand for oil?

iii.      Are there significant issues associated with fuel subsidy removal in Nigeria?

iv.      What are public perception on the gains and the pains of subsidy removal in Nigeria?

1.5       Research hypotheses

Ho: There are no significant issues associated with fuel subsidy removal in Nigeria.

Hi:  There are significant issues associated with fuel subsidy removal in Nigeria.

1.6       Significance of the study

The overarching aim of this study is to address these complexities and provide insights that contribute to a holistic understanding of the impacts of subsidy removal on the Nigerian economy and society. Understanding these complexities is paramount for policymakers, enabling them to make informed decisions that balance the short-term impacts with the long-term benefits and minimize disruptions to the vulnerable population. The study's holistic analysis and nuanced insights into the diverse dimensions of subsidy removal offer a comprehensive foundation for informed decision-making, fostering equitable economic growth, social welfare, and environmental sustainability. By providing a comprehensive analysis across economic, social, and environmental dimensions, the study equips policymakers with a nuanced perspective to navigate the complexities of subsidy reform. The findings offer valuable insights into potential challenges, opportunities, and the need for holistic approaches that balance economic development, social welfare, and environmental stewardship.

In addition, this study would enhance the policy formulation of the government especially in the downstream oil sector of the economy and help reduce the ignorance of some on the fuel subsidy issue Finally, it would contribute to existing literatures on the subject matter and serves as an invaluable tool for students, academic institutions and individuals who would like to know about the issues of fuel subsidy in Nigeria.

1.7       Scope of the Study

Owing that making an investigation like this on  assessment public perception on the issues associated with 2023 fuel subsidy removal in Nigeria is broad, there is need  to delimit the study to measurable scope hence the researcher selected  resident of Federal Capital Territory Abuja as the respondent for the study.

1.8 Limitation of the Study

During the course of the research,  few minor obstacles while conducting the study, just as in every scientific endeavour. It is worthy to note that the accuracy of the result will totally base on the data provided to the researcher by the  resident of Federal Capital Territory Abuja and the results of this study cannot be generalized for other states in Nigeria. Time restrictions were also an issue because the researcher had to complete this research while still going to classes and performing other necessary educational tasks.  However all aspects were minimized in order to deliver the best results possible and ensure the success of the research, despite the limitations that were faced during the study.

1.9 Definition of Terms

Subsidy: subsidy (subvention) is an amount of money paid by government to suppliers (providers or producers) of a product or service to enable them to sell their products or services to final consumers at a price determined by the government which is less than the true supply cost.

Fuel subsidy:Fuel subsidy is a government discount on the market price of fossil fuel to make consumers pay less than the prevailing market price of fuel.

---

---