The End of Subsidies and the Burden on Nigerians
The recent surge in fuel prices at Nigerian National Petroleum Corporation Limited (NNPCL) stations—N1,200 per litre in Abuja and N998 in Lagos—has once again thrown the nation into economic uncertainty. What used to be a minor adjustment now feels like a direct assault on the wallets of Nigerians. Fuel prices have jumped from N897 and N885, respectively, representing a sharp increase in just a short period. This shift is a result of NNPCL’s decision to exit its role as a middleman in the Dangote Refinery fuel purchase deal, a move towards full deregulation of the oil market. While this may be a strategic policy shift, it brings serious implications for the average Nigerian, especially as the government continues to phase out subsidies.
Deregulation and the End of Subsidies: A Necessary Evil?
On the surface, NNPCL’s decision to step out of the price-fixing role might seem like an inevitable step towards a deregulated market—one where prices are determined by market forces rather than government intervention. Deregulation is often painted as a beneficial move that promotes competition, reduces inefficiency, and attracts investment. However, the Nigerian case is far from straightforward.
For years, NNPCL absorbed part of the fuel cost, covering a subsidy of N133 per litre. This buffer helped shield Nigerians from the harsh realities of global oil prices and Nigeria’s own inability to refine petroleum products efficiently. The subsidy, however, also placed a financial strain on the government, eating into funds that could have been allocated to other areas like infrastructure, healthcare, and education.
But now, with NNPCL exiting this middleman role, Nigerians must bear the full brunt of global oil prices. A litre of fuel costing over N1,000 is devastating for the ordinary Nigerian, especially in a country where the minimum wage is only N30,000 ($38) per month. How are people supposed to manage their day-to-day lives when basic commodities like fuel—upon which the entire economy rests—are becoming unaffordable?
Economic Consequences: Higher Prices, Lower Living Standards
The increase in fuel prices will have a ripple effect on almost every aspect of daily life. Transportation costs will rise, leading to increased fares in public transport, which many Nigerians rely on. Businesses that depend on fuel—whether for powering generators due to unreliable electricity or for transportation of goods—will pass on the higher costs to consumers, inflating prices across the board.
This creates a vicious cycle. With inflation already a significant issue in Nigeria, the sudden spike in fuel prices will push more Nigerians into poverty, eroding purchasing power and lowering the overall standard of living. Meanwhile, the government’s insistence on moving towards full deregulation without first ensuring alternatives like adequate public transportation or stable electricity, shows a disconnect from the reality that millions of Nigerians face.
A Case of Mismanagement or Economic Necessity?
NNPCL has long carried the burden of subsidies, but critics argue that the situation reflects deeper systemic issues. Nigeria, despite being one of the world’s largest producers of crude oil, lacks functional refineries and must import petroleum products at a premium. This inefficiency has long been an Achilles’ heel of the Nigerian economy, creating a situation where billions are spent on fuel imports while the nation’s own refineries remain in disrepair.
The decision to end subsidies and move towards market-determined prices is perhaps a reflection of how unsustainable the old system was. As one NNPCL official noted, the company could no longer afford to carry the burden. However, there is also the issue of trust. Many Nigerians feel that they are being forced to pay more without seeing any real improvement in infrastructure or economic stability. Deregulation, in this context, feels less like an economic necessity and more like a way of shifting the burden onto the masses.
Who Benefits?
In theory, deregulation is supposed to encourage competition, which should lead to better prices and improved services. Yet, in Nigeria’s oil industry, a few dominant players—such as Dangote Refinery—may end up with significant control over prices, leaving little room for true competition. The “willing buyer, willing seller” model assumes a level playing field, but in reality, the market is skewed towards large corporations, making it difficult for smaller, independent marketers to thrive.
Moreover, the government’s withdrawal from fuel price control may reduce corruption in the subsidy regime, but if the benefits of deregulation are not passed down to the average Nigerian, who really gains? With Dangote Refinery processing 650,000 barrels of oil per day and independent marketers now negotiating prices directly, there are concerns that this consolidation of power could lead to monopolistic pricing.
Conclusion: A Short-Term Gain, Long-Term Pain?
NNPCL’s decision to raise fuel prices and exit its middleman role signifies a major shift in Nigeria’s oil market, but the impact on the Nigerian people cannot be ignored. Without subsidies, and with prices now determined by market forces, the cost of living is set to rise significantly. While the government may view this as a necessary step to stabilize the economy, Nigerians are left wondering whether the burden will ever ease. The transition to a fully deregulated market may promise long-term benefits, but in the short term, it feels like yet another economic hardship that ordinary Nigerians must bear.
What’s needed now is a clear plan to mitigate the impact of these price hikes—whether through targeted social interventions, improved public services, or policies that ensure real competition and transparency in the oil market. Without such measures, the benefits of deregulation may remain out of reach for the majority of the population.