Implications of fuel subsidy removal on achieving Universal Health Coverage in Nigeria

By Professor BSC Uzochukwu
Over the years, the government has provided financial support to maintain artificially low prices for petroleum products, particularly petrol and diesel. This practice is implemented to protect customers from the full impact of international oil price variations, which can increase fuel prices. So, since the 1970s, fuel subsidies are payments from the federal government in Nigeria that are used to cover gaps between market price and regulated price. Paying for fuel subsidies generally implies a trade-off between protecting consumers from rising fuel prices and the economic and fiscal implications of continuing to subsidize fuel.
Removing fuel subsidies in Nigeria refers to the government’s decision to end the policy of paying subsidies to oil marketers and importers of petrol. The decision to remove fuel subsidies has been motivated by the need to reduce government spending, promote economic growth, and curb corruption in the oil and gas sector. However, removing fuel subsidies has never been easy. At different times in 1978, 1993, 2003, 2012, 2016, and 2020, fuel subsidy removal attempts were met with stiff resistance from the public.
Surprisingly, on May 29, 2023, President Bola Tinubu at his inauguration as President of the Federal Republic of Nigeria announced the removal of fuel subsidy, leading to about 200% surge in the price of Premium Motor Spirit (PMS). It is expected that money saved from the removal of fuel subsidies will be used to invest in the health sector, which is why there is an emphasis on political will to achieve Universal Health Coverage (UHC).
However, a closer look at the removal of fuel subsidies and implications on the achievement of UHC shows impacts that are multifaceted and complex, with both positive and negative effects. While the positive effects like health insurance expansion, increased funding for health, etc., can only be guaranteed by transparency, accountability, and people-focused governance, the negative effects like increased household expenditure, increased vulnerability, etc., will likely wash away the existing gains towards achieving UHC.
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How to cite: Uzochukwu, B. (2023). Implications of fuel subsidy removal on achieving Universal Health Coverage in Nigeria.