By Jimoh Ibrahim Bamidele
The issue of fuel subsidy removal is not peculiar to the Nigeria economy; rather, it has draw attention on a global scale due to its socioeconomic effect and sustainability concern.
Although subsidies are meant to benefit consumers by keeping low prices, they are expensive.
According to IMF report of 2022, a whopping $5.9 trillion, or 6.8% of GDP, in 2020 of fossil fuel subsidies, and the predictions that this figure would rise to 7.4% of GDP by 2025 is of great concern. Due to their potential effects on sustainability, including climate change, fuel subsidies need to be eliminated.
Its socioeconomic impact in Nigeria has been the subject of numerous professional economic debates, but little attention has been paid to its sustainability concern. One of the most important steps towards lowering greenhouse gas emissions and controlling climate change is the removal of fuel subsidies.
However, this must be carefully studied to prevent unexpected outcomes such as price hikes that may damage the most vulnerable members of society and result in civil unrest.
Finding compensation measures to lessen the effects of the loss of fuel subsidies on weak and vulnerable population groups has been a difficulty for the Nigerian government since 2012.
Notably, the Nigerian government has severally postponed the elimination of fuel subsidies to allow for additional planning and consultations with major stakeholders, including the new administration.
However, on May 29, 2023, the newly inaugurated President Bola Ahmed Tinubu (PBAT) who cited the unsustainability nature of fuel subsidy announced its abolition in Nigeria.
This announcement has generated lots of mixed reaction from the citizens, while some stakeholder expressed support on the matter some have reservations about it.
It is crucial to assess the potential impact from a sustainability perspective as the Nigerian people wrestle with the economic and social consequences of this decision.
This article seeks to clarify the effects of Nigeria's removal of fuel subsidies and how it relates to the goals of sustainability. This would be considered on “Triple Bottom-Lines” concept which includes environmental, social, and economic components that are frequently referred to as the "three pillars of sustainability."
Foremost, in Nigeria, fuel subsidy has significantly increased the government's spending, causing budget deficits to grow, and making it more difficult to allocate funds to vital industries like healthcare, education, and infrastructure construction.
Therefore, the elimination of fuel subsidies is seen as a requirement for the economic sustainable development under the PBAT administration. The government can better address the needs of sustainable development and improve fiscal sustainability by reallocating money that was previously designated for subsidy.
Secondly, eliminating fuel subsidies is in line with the international push to mitigate climate change. Nigeria can reduce greenhouse gas emissions and mitigate the effects of climate change by lowering its reliance on fossil fuels.
One may argue that the pressure on the planet by developing countries is not as high as the industrialised countries, but the needs and priorities of the developing countries will continue to create significant variation in achieving sustainable development across the globe.
This decision is essential to fulfilling the nation's obligations under the Paris Agreement and achieving the transition to a more sustainable energy system.
In addition, Nigeria now has the chance to quicken the process of switching to renewable energy sources thanks to the elimination of fuel subsidies. The nation may promote the emergence of clean and sustainable energy systems by removing price distortions and encouraging initiatives in renewable energy. This change will encourage a cleaner and more sustainable future, increase energy security, and lessen reliance on erratic fuel supply.
Furthermore, the potential societal effects of eliminating fuel subsidy must be carefully considered. To make sure that the most vulnerable groups in society are not adversely affected, mitigating measures should be put in place.
The government may address social inequities, improve access to essential services, and foster inclusive development by diverting the money saved from subsidy removal onto targeted social investment.
Conclusively, In Nigeria, the elimination of fuel subsidies offers a special chance to harmonise economic, social, and environmental goals with a focus on sustainability.
Nigeria can strengthen its resilience and advance sustainability goals by redirecting the subsidy funds to projects and promote sustainable development.