According to Bola Tinubu, the president of Nigeria, eliminating a well-known gasoline subsidy will burden Nigerians more but free up funds for healthcare, regular electricity supply, transportation infrastructure, and education.
“I admit that the decision will impose extra burden on the masses of our people. I feel your pain,†Tinubu said on Monday in a broadcast to mark Democracy Day.
The government spent $10 billion on the subsidy last year, which increased the country's budget deficits and government debt while keeping gasoline prices low in Africa's largest economy for decades.
The cost of fuel has almost tripled, infuriating the labor movement and driving up transportation costs. Due to sporadic grid supplies, it has also impacted millions of households, small companies, and households who rely on gasoline generators.
it was his first statement to the public, since announcing the removal of the fuel subsidy during his inauguration on May 29,
Nigerians should bear the decision to "save our country from going under," the president stated.
“The government I lead will repay you through massive investment in transportation infrastructure, education, regular power supply, healthcare and other public utilities that will improve the quality of lives.â€
He did not specify a timeframe for when it would occur.
In order to mitigate the impact of rising international oil prices in the 1970s, the Nigerian government instituted an oil subsidy. In 1977, the military government of Olusegun Obasanjo formalized the subsidy by passing the Price Control Act, which set prices for goods including fuel.
One of the most important measures Tinubu pledged to implement during the presidential election campaign was the elimination of the fuel subsidy.
When then-President Goodluck Jonathan announced the removal of subsidies in January 2012, the word "subsidy" quickly spread across the country. Fuel prices rose from 65 naira ($0.14) to 140 naira ($0.30) per litre, sparking #OccupyNigeria rallies that lasted for almost two weeks.
The elimination of subsidies this time enraged labor groups, but following discussions with the administration, they have suspended an indefinite strike. Among their many demands, the unions want the monthly minimum wage to increase by more than six times from the current level of 30,000 naira (approximately $65).
According to rating agencies Fitch and Moody's, Tinubu's plans to unify the country's several exchange rates and willingness to take on the fuel subsidies are good for the economy.