There has never been such a thing as fuel subsidy, not as a fact. What Nigeria has always had is the recurring devaluation of the naira. Subsidy is simply the gap between the naira’s last value and its present value. You cannot remove subsidy any more than you can remove your own shadow.
When the price of fuel is adjusted to close the present gap created by the naira’s depreciation, that very adjustment triggers another round of depreciation. Here is why: raising the price of fuel puts more naira into circulation, and that naira comes back to chase the available foreign exchange. The result is a fresh wave of depreciation, leaving an even wider gap between the real value of fuel and the newly depreciated naira. Government cannot immediately pass this new cost on to the public, so it resorts to subsidy again, this time at a higher rate than before.
The only way to truly eliminate subsidy is the same way you eliminate your shadow: by standing directly beneath the sun. In this case, the sun is the foreign exchange the country actually earns. The naira, meanwhile, is created by the volume of government spending, its fiscal measures. When the naira is aligned with earned foreign exchange, and stays there long enough to produce a stable exchange rate, subsidy disappears on its own.
Tinubu says he removed subsidy, but we now know he still pays it, and at a much higher rate than before. That is because Tinubu lacks the fiscal discipline to align government spending with what the country actually earns. Subsidy was never anything but another name for government recklessness. It still is.
Published by Chuks Nwachuku
