Fuel Subsidy Removal: Economist predicts reduction in fuel price

Prof. AbdulGafar Ijaiya of the Department of Economics, University of Ilorin, has expressed optimism at President Bola Tinubu’s inaugural remarks on the removal of fuel subsidies, saying this may reduce prices in the long run.

Ijaiya, who spoke on Monday in Ilorin, observed that with commitment from the Federal Government to revamp existing refineries alongside Dangote refineries, this will increase the availability of petroleum products.

The expert, however, who explained that such an effect may not be felt immediately, noted that the present pump price is about N200, depending on filling stations across the country.

He questioned if the present fuel price of about N200 was a result of the subsidy removal, adding that if it is not, then fuel may likely increase by about 50 percent after the removal.

“But the thing is that very soon, what has gone wrong with the refineries will be corrected, and Dangote refineries will commence by July or August,” he said.

Ijaiya, who teaches in the Faculty of Social Sciences at the university, pointed out that in the beginning there might be an increase in the prices of foods and services.

He, however, asserted that in a society like Nigeria, where people are used to hikes in prices, it would not mean much to the citizens.

“By economic principle, we have adjusted our expenditure profile consumption to particular items. We have moved from consuming luxury and unnecessary items to necessary items.

“This means people go for what is necessary and do away with those that are not,” he said.

Ijaiya affirmed that in the long run, the fuel pump price will adjust downward and there will be more supply of the products.

He further added that when there is more supply of a particular product on the market, it will automatically reduce the price.

“If we have enough supply with time and there are no other man-made distortions that have to do with our behavior, I see us buying it between N80 and N100 per liter,” he predicted.

The economist also foresee filling station advertising and competing for sales, saying it will be good for the nation.

He, however, cautioned that “we are in an uncertain world”, but maintained that fuel subsidy removal would be good for the country eventually, as only a minority is benefiting from it.