The history of increase in pump price for petrol and other refined petroleum products is one most Nigerians are familiar with. In April 1992, the head of state, General Ibrahim Babangida increased the pump price of petrol from 15.3 kobo to 20 kobo per liter. Since then, successive government have tinkered with the pricing, and now, the government of President Buhari has pegged the price at 145 Naira per liter. What is unique about this latest increase however, is the issue of subsidy removal and its attendant effect on the cost of the essential commodity.
Subsidy of petroleum product as an economic policy evolved as a means to cushion the effect importation of petroleum products had on the cost of the commodity and it's attendant hardship on the average citizen. What it basically en tails is that for every liter of fuel imported into the country, the government pays a percentage off the top in order for it to be sold below the cost of production (or in this case, importation). On the surface, the idea seems to be a good one as it makes fuel products available at cheaper rates, but economists would argue that not only is it inherently unsustainable, it is also highly detrimental to the economic growth of the nation. When you consider that the population of the country is increasing daily, and the demand for petroleum increases also, the government would have to budget astronomical figures yearly to maintain fuel subsidy. This means that a larger percentage of cash would be used for subsidy than for capital expenditure. As a matter of fact, in 2013, the GEJ administration estimated that between 1.3-1.5 trillion naira was being expended in maintaining subsidy annually, which was more than the combined capital expenditure for that year alone.
It is no surprise hence, that at the beginning of his administration, President Olusegun Obasanjo thought it wise to do away with the unwanted payments. Before he could do that, there was a massive enlightenment campaign in the media on the benefits of removing fuel subsidy and full deregulation of the downstream sector. Due to the combined efforts of civil society organizations, organized labor and political factors, the idea was shelved. The Yara’Adua administration was relatively quiet on the issue, but it was Good luck Jonathan who stirred the hornets’ nest by announcing removal of subsidy on the first day of the first month of 2012. However, after a gale of protests rocked the nation, he announced a partial removal as against a full removal and pegged the price at 97 naira per liter, a price he adjusted to 87 naira just before leaving office.
President Buhari has just announced a full removal of subsidy and has set a price of 145 naira per liter for petrol. The aim of this is to save government expenditure in these difficult economic times as well as pave the way for increased spending on capital projects. The benefits accruing from the prudent use of funds saved from subsidy payment are myriad, but a few of them include;
-Increase in funds available to be utilized for capital projects.
-Direct impact on the exchange rate as it will free up pressure on the dollar, thus we expect to see a reduction in the naira to dollar ratio.
-Local refineries will begin to work, as it will not be attractive to import petroleum products anymore.
-Increase in the availability of jobs as more capital investments will be initiated.
For the time being however, the short term effects of the increase in pump price are being felt. The price of transportation is directly affected, and as it goes up, the price of essential commodities will skyrocket. The cost of living will increase astronomically, and we expect a massive brain drain from the intelligentsia mostly who will leave the country in droves to seek greener pastures.
Government has to step in at this precarious moment to cushion the cascading effects of this new policy. The following should be implemented;
-First, the Federal Executive council (FEC) should be commended for initiating a social welfare scheme for the poor and vulnerable in the society to protect them from the harsh economic realities.
-FEC should as a matter of urgency initiate an upward review of the minimum wage as the present minimum wage is grossly incapable of mitigating the effects of the economic realities.
-The bank of Industry should be injected with more funds in order to enable them dispense low and no interest loans to small and medium scale enterprises. This will ensure that jobs are created on a micro and macroeconomic scale.
-FEC should create a favorable economic environment that will ensure a reduction in the rate of brain drain and capital flight currently plaguing the nation.
In conclusion, I do recognize that it is the function of organized Labor to fight against any policy that seems to be detrimental to the survival of the masses, however in this case I suggest that the apparatchik of their arsenal be directed to fighting for an increase in minimum wage, and we all as Nigerians should not keep silent about this issue. That is our right and our duty.

A.P..2016

The reason there is increase in the demand of fuel, apart from the population, is lack of power supply. Most businesses run on generators.The removal should have been a gradual process. The pa's government talked about Sure-P, but we did not see that impact in the rural areas. The money was given to those with connection in high places.
Government is a continuous process.
They have been falling us, how can we trust them on this?

Fuel Subsidies Payment s make Government a Continuous Plunderer., a Thief and unrepentant Dictator. Labour agitation for minimum wage without knowledge of Productivity for sourcing funds for such minimum is arrantly irresponsible Fuel Prices should fixed on Cost of Production and not on Imported pricing. The F.G should immediately arrange for NNPC to produce 100 percent Fuel for Domestic Consumption. The idea of 50:50 Venture/Import system is a Drain on our Foreign Reserves and the major cause of the forex and Naira mess

Flexherbal:
The reason there is increase in the demand of fuel, apart from the population, is lack of power supply. Most businesses run on generators.The removal should have been a gradual process. The pa's government talked about Sure-P, but we did not see that impact in the rural areas. The money was given to those with connection in high places.
Government is a continuous process.
They have been falling us, how can we trust them on this?

that is a valid and legitimate question. however, the new government has shown signs of commitment to revamping the economic structure. it will do us a world of good as citizens to ensure we keep this government on their toes by continuous constructive criticism in order to ensure they do not derail from their set target.

Fuel Subsidies Payment s make Government a Continuous Plunderer., a Thief and unrepentant Dictator. Labour agitation for minimum wage without knowledge of Productivity for sourcing funds for such minimum is arrantly irresponsible Fuel Prices should fixed on Cost of Production and not on Imported pricing. The F.G should immediately arrange for NNPC to produce 100 percent Fuel for Domestic Consumption. The idea of 50:50 Venture/Import system is a Drain on our Foreign Reserves and the major cause of the forex and Naira mess we are in right now.

orisa37:
Fuel Subsidies Payment s make Government a Continuous Plunderer., a Thief and unrepentant Dictator. Labour agitation for minimum wage without knowledge of Productivity for sourcing funds for such minimum is arrantly irresponsible Fuel Prices should fixed on Cost of Production and not on Imported pricing. The F.G should immediately arrange for NNPC to produce 100 percent Fuel for Domestic Consumption. The idea of 50:50 Venture/Import system is a Drain on our Foreign Reserves and the major cause of the forex and Naira mess we are in right now.

100% production of fuel locally is a major agenda of this administration. with prudent financial management and favorable macroeconomic growth, we hope to see this achieved.