Fuel crisis: Middle East war driving pain — City Boy Movement

The City Boy Movement has dismissed calls for the return of petrol subsidy, arguing that the current hardship caused by rising pump prices is being driven largely by global geopolitical tensions, particularly the conflict involving the United States, Israel and Iran and its impact on crude oil prices.

The group, through its National Director of Students Engagement and Senior Special Assistant to President Bola Ahmed Tinubu on Students Engagement, Comrade Sunday Asefon, urged Nigerians to resist what it described as attempts by “subsidy merchants” to exploit the current economic hardship to pressure the Federal Government into reversing the 2023 downstream petroleum reforms.

Asefon, in a statement, argued that the increase in petrol prices from pre-May 2023 levels to the current range of about N1,300 to N1,400 per litre could not be attributed solely to subsidy removal.

He said developments in the international oil market had become a major factor in the latest price pressures, particularly the conflict in the Middle East.

Asefon specifically pointed to the Strait of Hormuz, which he described as a critical artery for global oil supplies, warning that any major disruption could push international crude prices substantially higher and worsen fuel costs across oil-importing countries.

According to him, the development underscored the importance of Nigeria having sufficient domestic refining capacity rather than depending largely on imported petroleum products.

The group claimed that without the Dangote Refinery, petrol prices in Nigeria could have risen to between N5,000 and N6,000 per litre amid the current international crisis, citing recent comments attributed to the Independent Petroleum Marketers Association of Nigeria, IPMAN.

“Without Dangote Refinery, the price of petrol in Nigeria today will be around N5,000 per litre,” Asefon said, arguing that local refining capacity had provided the country with some protection against external shocks.

He further claimed that the 650,000-barrel-per-day Dangote Refinery was producing about 32 million litres of petroleum products daily and had significantly reduced Nigeria’s dependence on imported fuel.

Citing government figures, the statement said petrol import expenditure had declined substantially since the emergence of domestic refining, while the refinery’s operations had helped reduce pressure on the country’s foreign exchange requirements.

Asefon also contended that the deregulated market had made petrol comparatively cheaper in Nigeria than in some neighbouring West African countries.

He quoted Aliko Dangote as saying that Nigerians were currently paying about 55 per cent of the price paid for petrol in some other West African countries, where pump prices were said to be around N1,600 to N1,700 per litre.

The presidential aide maintained that reversing subsidy removal would undermine investments in domestic refining and return the country to its former dependence on imported petroleum products.

He described the former subsidy regime as unsustainable, alleging that it consumed enormous public resources without creating corresponding investment in local refining.

According to him, former Minister of Finance Wale Edun had estimated that petrol subsidy and associated foreign exchange costs were consuming about five per cent of Nigeria’s GDP, or roughly $20 billion annually.

Asefon said resources released by the reforms were now being channelled into various government programmes, including infrastructure, social investment and support to subnational governments.

He listed the Presidential Compressed Natural Gas, CNG, initiative among the programmes which, according to him, were helping Nigerians cope with higher petrol prices.

The statement said private investment in the CNG sector had risen to about $980 million within 18 months, while the number of CNG-powered vehicles had increased significantly.

Asefon claimed that motorists who had converted their vehicles to CNG were recording savings of up to 90 per cent on fuel expenditure.

He also cited the Nigerian Education Loan Fund, NELFUND, as another benefit of the administration’s reforms, saying the scheme had provided billions of naira in tuition and upkeep support to hundreds of thousands of Nigerian students.

He said the student loan scheme was designed to ensure that financial difficulties did not force Nigerian students out of tertiary institutions.

Other measures highlighted by the presidential aide included the consumer credit programme, livelihood support to states, the increase in the national minimum wage to N70,000 and the increase in the NYSC allowance to N77,000.

On taxation, Asefon said the administration’s tax reforms were designed to create a more favourable environment for businesses and shield low-income earners from excessive taxation.

He argued that a return to petrol subsidy would amount to reversing reforms that were beginning to create the foundation for a more self-sufficient energy economy.

Acknowledging the hardship being experienced by Nigerians, however, Asefon said the government should not pretend that the economic situation was easy.

“Yes, I understand there is pain. Petrol at N1,300 is painful. Inflation is moderating, but food prices are still high. I am not going to stand here and pretend that everything is perfect,” he said.

He, however, challenged those advocating a return to subsidy to explain how the country would finance such a policy without recreating the distortions and import dependence associated with the former regime.

He asked whether Nigeria should return to a system of heavy petroleum imports at a time when international oil prices were being threatened by escalating geopolitical tensions.

According to him, such a move could expose Nigerians to even higher pump prices, fuel shortages and renewed dependence on foreign suppliers.

Asefon described subsidy removal as a “necessary surgery”, saying the country was now in the recovery phase despite additional pressure from global economic and geopolitical developments.

“The patient has left the operating table and is in recovery mode, though the global economic environment is making the recovery harder. But the surgeon has not abandoned the patient,” he said.

He maintained that the current international crisis would eventually ease, while Nigeria would retain the benefits of increased domestic refining capacity, a growing CNG market, student financing and other reforms.

Asefon therefore urged Nigerians to resist what he described as political manipulation of the current economic hardship and remain patient with the reforms.

“The pain is from geopolitics, not from the subsidy policy. And the gains of subsidy removal are emerging already. Let us stay the course. Nigeria will rise again,” he said.