Yemisi Izuora
The Center for the Promotion of Private Enterprise (CPPE) has advised that the temporary petrol price adjustment by Government should be broadened as its limited coverage means that its aggregate impact on household welfare will also be limited.
The Center said that Government should therefore pursue broader interventions that address the principal channels through which the energy price shock affects citizens.
The Chief Executive Officer, of the CPPE, Muda Yusuf (PhD) in a position note on the policy, said Government should first scale up affordable mass transit as transportation remains one of the most immediate transmission channels of higher energy prices to household expenditure and business operating costs.
In addition both the Federal and state governments should prioritise high-capacity buses, including Compressed Natural Gas (CNG) electric and other economically viable alternatives.
Yusuf, noted that Targeted investment in heavily subsidised public transportation would deliver broader economic and social benefits than limited petrol price discounts.
By reducing commuting costs for millions of citizens, particularly low-income workers, students and small business operators, such interventions would provide more inclusive relief and protect household purchasing power, he said.
They would also improve labour mobility, reduce operating costs for small enterprises and stimulate economic activity.
Yusuf, also called for adequate support for agricultural productivity and food supply as rising energy costs increase the cost of land preparation, irrigation, mechanisation, transportation, storage and food distribution.
Government in his opinion should provide targeted support for access to fertilisers, agrochemicals, agricultural machinery and other productivity-enhancing inputs.
The priority should be to reduce the cost of food production and distribution rather than rely predominantly on general consumption subsidies.
Added to that , he stressed the need for Government to strengthen state and local government interventions.
He said the burden of responding to the current economic shock should not rest exclusively on the Federal Government.
“State governments have significant responsibilities for public transportation, education, healthcare, agricultural development and local economic welfare.
States could consider designated discounted fuel outlets, subsidised public transport and targeted support for vulnerable households.
“Such programmes must have clear eligibility rules, a time frame, transparent funding and safeguards against diversion.” Yusuf wrote.
He cautioned on the importance of protecting the integrity of petroleum market reforms, adding that Government should sustain market-based pricing, fair competition, transparent regulation and a trade policy framework that supports domestic refining investment.
Speaking broadly on the issue, he expressed is concerned about attempts to characterise the fuel price relief initiative through the Nigerian National Petroleum Company Limited (NNPC) as a reversal of the petroleum subsidy removal policy.
Such an interpretation he said is misleading and fails to distinguish between a fundamental policy reversal and a temporary intervention in response to an extraordinary economic shock.
The current escalation in petroleum product prices is driven principally by developments in the global energy market, particularly geopolitical tensions that have pushed crude oil prices above $100 per barrel.
This is an external shock affecting both oil-producing and oil-importing economies. It is neither a consequence of Nigeria’s subsidy removal policy nor peculiar to the Nigerian economy.
Extraordinary economic circumstances sometimes require exceptional policy responses.
Governments across the world have historically intervened to cushion households and businesses against severe external shocks without abandoning their underlying economic management philosophy and framework.
The COVID-19 pandemic provided compelling evidence of this approach, even in advanced market economies.
Economic policies are instruments for promoting citizens’ welfare; they should not become rigid doctrines that prevent governments from responding to exceptional social and economic difficulties, he noted.
According to him, The distinction between the previous subsidy regime and the current intervention becomes particularly evident when their respective scales are examined.
Under the former subsidy arrangement, government effectively carried a substantial fiscal burden on nationwide petrol consumption, estimated at various times at between 50 million and 90 million litres daily. The arrangement created enormous fiscal pressures, weakened public finances, crowded out development spending and contributed to macroeconomic instability.
By contrast, according to reported figures, the current intervention covers approximately 70 million litres of NNPC fuel supply monthly, compared with estimated national petrol consumption of 50 million litres daily.
More importantly, Yusuf, said the intervention does not reinstate an administered national petrol price, impose a general subsidy obligation on private operators or dismantle the market-oriented framework for petroleum product pricing.
In addition he pointed out that the commercial status of NNPC does not eliminate the government’s responsibility to respond to exceptional public-interest considerations.
NNPC remains a government-owned commercial enterprise with a diversified portfolio of petroleum-related businesses.
Its commercial mandate should ordinarily guide its operations. However, temporary and clearly defined public-interest interventions can be accommodated within an appropriate governance framework.
The critical consideration is that such interventions must be transparent, proportionate, time-bound and financially sustainable. Government ownership creates an opportunity to deploy public assets strategically in exceptional circumstances. It does not, however, justify an indefinite departure from commercial discipline. The objective should be to reconcile commercial sustainability with legitimate public-interest obligations, rather than present both as mutually exclusive.
The CPPE maintains that the removal of the previous petroleum subsidy was a necessary structural reform.
Reinstating a broad-based consumption subsidy would recreate serious fiscal vulnerabilities and consequential distortions in the economy.
Such an obligation would be fiscally unsustainable, especially in an economy facing substantial infrastructure deficits, debt-service commitments and competing development priorities.
However, a limited and temporary intervention should not automatically be interpreted as a deterioration in policy credibility.
Investors are principally concerned about policy predictability, market access, commercial viability, fiscal sustainability and the protection of legitimate investments. These fundamentals need not be compromised by a narrowly targeted emergency relief measure.
The private sector remains the dominant participant in the downstream petroleum market. Provided that government does not impose commercially unviable prices, discriminate against private operators or introduce distortive market restrictions, the current initiative need not undermine investor confidence.
In summary, the CPPE noted that the current fuel price relief initiative should be understood as a limited response to an extraordinary global energy shock, not a reversal of the policy on petroleum subsidy removal.
“The intervention is substantially different in scale, design and potential fiscal implications from the previous subsidy regime. Its temporary character and limited market coverage are important distinctions.
“The priority should be to protect vulnerable citizens, preserve the sustainability of public finances and maintain the integrity of ongoing economic reforms.
Nigeria does not need a return to the fiscally destructive subsidy regime. What it needs is a credible framework for temporary, targeted and transparent social protection during exceptional economic shocks.
“The current global energy crisis demands pragmatic policy responses, not ideological rigidity. Economic reforms must remain sustainable, but they must also be responsive to the welfare of the people.” Yusuf said.