The subsidy removal has angered Nigerian labour unions but they have suspended an indefinite strike after talks with the government.
Nigeria’s new President Bola Tinubu has said his decision to remove a popular petrol subsidy would impose an extra burden on citizens but would free up money for education, regular power supply, transport infrastructure and healthcare.
“I admit that the decision will impose extra burden on the masses of our people. I feel your pain,” Tinubu said on Monday in a broadcast to mark Democracy Day.
The subsidy had kept petrol prices cheap for decades in Africa’s biggest economy but it became increasingly costly for the country – the government spent $10bn last year – leading to wider budget deficits and driving up government debt.
Petrol prices have nearly tripled in Nigeria, angering unions and causing a spike in transport costs. It has also hit small businesses and millions of households who rely on petrol generators for power due to intermittent grid supply.
It was his first public comment since announcing the petrol subsidy removal after his swearing-in on May 29.
Nigerians, the president said, should bear the decision to “save our country from going under”.
“The government I lead will repay you through massive investment in transportation infrastructure, education, regular power supply, healthcare and other public utilities that will improve the quality of lives.”
He did not give a timeline of when this would happen.
The Nigerian government introduced an oil subsidy to cushion the effect of rising global oil prices in the 1970s. The Olusegun Obasanjo military regime formalised the subsidy in 1977 when it promulgated the Price Control Act which regulated prices of items including fuel.
Scrapping the fuel subsidy was among the top reforms that Tinubu promised during the presidential election campaign.
Subsidy became a national buzzword in January 2012 when then-President Goodluck Jonathan announced the subsidy removal. Fuel prices increased from 65 naira ($0.14) to 140 naira ($0.30) per litre and triggered almost two weeks of protests known as #OccupyNigeria.
This time, the subsidy removal angered labour unions but they have suspended an indefinite strike after talks with the government. The unions want a more than sixfold rise in the monthly minimum wage from 30,000 naira (about $65) among a raft of demands.
Rating agencies Fitch and Moody’s have said Tinubu’s readiness to confront the fuel subsidy and plans to unify the country’s multiple exchange rates was positive for the economy.
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