How Nigeria can ease removal of petrol subsidies

Nigeria is currently grappling with the aftermath of President's announcement to remove petrol subsidies, creating a new reality with increased costs for commuters, households, and businesses. Ayodele Oni, a Partner at Bloomfield Law Practice, shared insights on how Nigeria can ease the transition into a deregulated market. The removal of the subsidy has sparked conversations with organized labor seeking interventions to cushion the impact on Nigerians. Oni believes that while labor's stance is expected, the decision to remove the subsidy was a fiscally responsible move to address long-standing fiscal irresponsibility. He sees it as a strategic political decision to prove the government's effectiveness over its term. The transition into a deregulated market involves opening up the market to more players to drive competition, potentially leading to price reductions in the medium to long term. Oni emphasized the importance of refining crude oil locally to reduce import costs. Increasing public power supply and promoting alternative transportation modes can also lessen the reliance on petroleum products, thereby decreasing overall consumption. These measures, if accelerated by the government, could mitigate the adverse effects of price increases and currency devaluation. The issue of smuggling and accurately quantifying the nation's petrol consumption also surfaced during the discussion. Oni acknowledged that smuggling could persist if prices remain lower in Nigeria compared to neighboring countries. However, he anticipated a reduction in smuggling activities with stricter enforcement by customs and improved local refining capabilities. In conclusion, while the removal of petrol subsidies presents immediate challenges for Nigerians, proactive measures such as enhancing refining capacities, diversifying transportation options, and curbing smuggling can ease the transition to a deregulated market. The government's swift action in implementing these strategies will be crucial in managing the impact of rising prices and currency fluctuations.