The dramatic change in the level of subsidy was due to the increase in national demand to 35million litres/day, sometimes, more, as well as increase in the price of crude on the international market-Alison Madueke, Minister of Petroleum Resources on the subsidy removal probe.

The Oxford advanced Learners Dictionary (2001) defines subsidy as money that is paid by a government or an organisation to reduce the cost of services or of producing goods so that prices can be kept low. To subsidise is to sell a product below the cost of production. Within the Nigerian context, fuel subsidy means to sell petrol below the cost of importation.

As a petroleum producing nation exporting about two million barrels of crude per day, it is astounding to know that due to corruption and selfishness and ineptitude, the four refineries the nation has cannot distil one-sixteenth of the crude the country exports for domestic consumption.

Fuel subsidy was introduced during the Ibrahim Babangida regime in 1992 as a palliative to last six months, pending the time the refineries would be resuscitated but 22 years down the line, refineries are nowhere near functioning at optimum capacity and subsidy has grown to become a national phenomenon.

The fuel importation cabal, as the companies involved in the importation of petroleum products are now referred have, with the help of the subsequent administrations have been alleged to put cogs in the wheel of making the refineries function in a way that will minimise importation of refined products and so continue to fleece the country by making bogus reimbursement claims and even diverting products already paid for by the country to nearby countries where the pump prices for petrol are higher!
Thus, the country continues to bleed, with subsidy claims jumping from N150 billion in 2010 to N1.2 trillion in 2011!! There have been calls mostly from government officials and some entrepreneurs for the removal of subsidy, thereby allowing prices of premium motor spirit and kerosene to be at the mercy of market forces, like what is obtainable with diesel.

At the moment, Americans are having more money in their wallets, due to the oil glut, with the cheapest gasoline prices since 2010 amounting to about $500 in annual savings for the average gas-guzzling American, with prices crashing from $3.047 on the first of December 2014 to $2.878 as at the 15th of December 2014 in California for instance. Even Tanzania has reduced pump prices by an average of two and has directed all dispensing stations to ensure they do not go above the cap price.

For Nigeria, reliance on the importation of fuel has put it on the negative side of the balance sheet for so long, that the only weight on the scale saving it from brokenness is that she is a major oil producer. Thus, when the prices of crude oil crashed from $115 as at June 2014 to less than $60 by mid-December, the nation had began to groan under the impact of the crash.

The crash in prices is as a result of global oil glut, which has resulted in the flooding of the crude market with excess commodity, and despite the glut, OPEC maintains that member countries continue to churn out their quota. This has resulted in a reduction of revenue for Nigeria with the Minister of Finance, Ngozi Okonjo-Iweala being forced to continuously review downward the budget benchmark price for crude upon which the Nigerian 2015 budget would be based.
There is even a greater likelihood for more downward review if prices continue to fall. With much reduced foreign exchange
earnings due to reduced exports and lowering crude price, the central bank was not able to further defend the value of the naira and had to devalue the currency.

Although analysts opinion vary on this option, the twin evil of reduced foreign exchange earnings and politicians stacking foreign currencies exposed the local currency to attacks the bank could not defend.

Thus the fall in crude prices and devaluation of naira brings forth the question of what should become of pump prices in Nigeria?

It is of note that whenever pump prices were increased in the nation, prices of consumer items shot up in response, thus leading to increased hardship for the masses as salaries and wages remained mostly stagnant.

This greatly reduces their spending power. Now that the oil glut on the global market has ensured the more than halving the prices of crude in the market between June and December 2014, prices of petroleum products have also reduced since less is spent in the distillation of these products at refineries.

The Labour Union and some others are calling on the Federal Government to lower the prices of premium motor spirit (pms) and kerosene for this basic logic that the reduction in pump price the world is enjoying should also trickle down to the common Nigerian.

Unfortunately, that may not be possible. This is simply because as petrol importer, beyond the price of purchasing the product from refineries, other charges are incurred.
This along with the cost of transporting the product from the refineries to the port and also charges incurred from haulage and other taxes as well are all combined to be known as landing cost. When this is added to the ill-timed devaluation of the currency, which stands at about N187 to $1 as at 16th December, 2014, the cost of importation of petrol remains high and still requires augmentation.

The devaluation of the currency was ill-timed and seems to be a sinister move by the central bank in order to make more naira available to government. If the naira was allowed to run its course against foreign currencies, especially the dollar, perhaps, the cost of importation of petrol would be reduced, probably close to what is attainable at the moment (N97).

By devaluing the naira, importers spend more to buy petrol and therefore hike the final sale price. We should take note of this period and note down the figures that would be dropped by the Minister of Finance over subsidy claims, because we should certainly have it lower than what we have had before.

What Nigerians should clamour for is the total removal of fuel subsidy, thereby leaving the prices of petroleum products to market forces. This simply means that the opportunity for leakages and astronomical claims for subsidy by marketers and importers will be plugged for good.

Government can then, as it has always claimed, use the money saved from subsidy payments for projects it has always longed to begin or complete. There is a need for government to get all the funds it needs to keep the economy afloat during these trying times, and certainly, paying subsidies is one of those things that need to be cut from the budget.

The benefit of deregulation of the downstream sector has been over flogged, and despite fears that the plight of the common man would be worsened with the high cost of goods, if the sector is opened up to private investors, the long term benefits in terms of direct and indirect employment, commerce and infrastructure development will far outweigh short term pains.
Hopefully too, the calamity that befell the power sector after privatisation will not be the lot of the petroleum sector, because it is very salient that Nigeria refines its domestic needs in order to bring down the prices of commodities in the country.