In Nigeria, a country long touted as the “Giant of Africa,” the price of fuel has become a barometer for the nation’s economic health and a source of unrelenting frustration for its citizens. When the government announced the removal of the fuel subsidy in May 2023, it set off a cascade of economic consequences that continue to reverberate through every corner of Nigerian society. The fuel price crisis, far from being a singular event, represents a broader failure to address the structural problems in Nigeria’s economy.
At the heart of this crisis is the devaluation of the Naira, which has exacerbated the cost of imported goods, including fuel. As the Naira plummets in value, the cost of fuel has skyrocketed, placing an unbearable burden on Nigerians who are already grappling with high inflation, stagnant wages, and widespread unemployment. The government’s decision to remove the subsidy was touted as a necessary step towards deregulating the petroleum sector and attracting investment. Yet, it has also left many wondering if the timing was right, especially given the fragile state of the economy.
To fully grasp the fuel price crisis, one must first understand the role of the Dangote Refinery, which has been hailed as a potential game-changer for Nigeria’s oil sector. Located in Lagos, the refinery is designed to have the capacity to produce 650,000 barrels per day, making it the largest single-train refinery in the world. The idea behind the refinery was simple: reduce Nigeria’s dependence on imported refined petroleum products, save foreign exchange, and create jobs. However, the reality has proven more complex. Despite the refinery’s promise, it has yet to reach full operational capacity, leaving Nigeria still heavily reliant on imported fuel. As a result, the anticipated reduction in fuel prices has not materialized, and Nigerians continue to suffer under the weight of high costs.
Adding to the complexity is the Nigerian National Petroleum Corporation Limited (NNPCL), which finds itself in a precarious financial situation. Once the cornerstone of Nigeria’s oil sector, the NNPCL is now struggling under the weight of enormous debt. Years of mismanagement, corruption, and inefficiency have eroded the company’s ability to effectively manage Nigeria’s oil wealth. In an effort to keep up with its obligations, the NNPCL has resorted to borrowing heavily, which has only compounded its financial woes. As the government looks to the NNPCL to play a key role in the post-subsidy era, the company’s debt burden raises serious questions about its ability to deliver on its mandate.
The fuel price crisis also shines a spotlight on the broader issue of the government’s distortion of economic laws. In a well-functioning market, prices are determined by supply and demand, with minimal interference from the state. However, in Nigeria, the government has a long history of meddling in the economy, often with disastrous results. The removal of the fuel subsidy is a prime example of this. While the government claimed that deregulation would lead to greater competition and lower prices, it failed to account for the structural issues that have long plagued the Nigerian economy, such as the lack of infrastructure, corruption, and monopolistic practices. Instead of allowing market forces to determine prices, the government’s intervention has created a situation where prices are artificially high, and ordinary Nigerians are left to bear the brunt.
Nigeria’s laissez-faire economic policy has its limits, especially in a context where the conditions for a perfect market do not exist. The government must intervene in certain sectors to regulate monopolistic behavior, address income inequality, and ensure that competition is fair and beneficial to the larger population. Nigeria’s fuel crisis is a prime example of how unchecked market forces, without proper regulatory frameworks, can lead to the exact opposite of what free markets are supposed to achieve: increased consumer choice, lower prices, and innovation. Instead, Nigerians are grappling with a system that seems rigged against them, where a few powerful players control entire sectors of the economy to the detriment of millions.
For instance, the cement industry is monopolized by a few key players, leaving consumers with few alternatives and higher costs. Similarly, the sugar and oil industries operate under monopolistic control, with little room for smaller players to enter and compete. This concentration of power has stifled competition and led to artificially high prices, a pattern that seems to be repeating in the petroleum sector. The government’s reluctance to break up these monopolies or enforce competition laws has allowed this cycle to continue unchecked.
The removal of the fuel subsidy, without addressing these deeper issues, risks turning what could have been a positive reform into a catastrophe for millions of Nigerians. While subsidy removal was necessary to correct the distortions in the economy, it has been done without ensuring that the necessary safety nets are in place to protect the most vulnerable. Moreover, the government has failed to foster an environment where competition can thrive, thereby allowing monopolistic behavior to continue unchecked. Instead of benefiting from deregulation, Nigerians are faced with higher fuel prices, increased transportation costs, and a rising cost of living.
This crisis is also a reflection of the broader failure to diversify Nigeria’s economy. For decades, successive governments have paid lip service to the idea of diversification, but the reality has been a continued reliance on oil revenues to fund the state. The failure to develop other sectors, such as agriculture, manufacturing, and technology, has left Nigeria vulnerable to the volatility of global oil prices and exchange rate fluctuations. The fuel price crisis is a wake-up call, a reminder that Nigeria cannot continue to depend on oil as its main source of revenue. Diversification is no longer just an aspiration; it is an economic imperative.
Ultimately, Nigeria’s fuel price crisis is not just about fuel; it is about the deeper structural problems in the economy that have been allowed to fester for too long. The devaluation of the Naira, the inefficiencies of the NNPCL, and the monopolistic control in key sectors are all symptoms of a larger disease. To truly resolve this crisis, the government must go beyond short-term fixes and address the root causes of Nigeria’s economic malaise. This requires a bold and comprehensive reform agenda that tackles corruption, fosters competition, and promotes economic diversification. Only then can Nigeria break free from the cycle of fuel crises and set itself on a path towards sustainable growth and development.
Stephanie Sewuese Shaakaa.
University of Agriculture.
Makurdi, Benue State
