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Why Are Fuel Prices So High in Nigeria, and solutions to it? – Reno Omokri

Published by Tope Fakinlede on September 7th, 2024.

Why Are Fuel Prices So High in Nigeria, and solutions to it? – Reno Omokri

Understanding the high fuel prices in Nigeria requires recognizing that the government cannot solely support us; rather, we support the government. There are four primary sources of government revenue:

1. Seizure of Resources: Historically, governments have taken control of resources, as seen with General Aguiyi Ironsi’s Unification of Assets Decree Number 34 in 1966.

2. Taxation: Revenue is also generated through taxes imposed on citizens and corporations.

3. Money Printing: Governments may print money to fund their expenditures.

4. Borrowing: Governments can also acquire funds through loans.

Outside these methods, governments do not generate revenue independently.

Nigerians often expect extensive services from the government but contribute minimally through taxes. For instance, Germany’s tax-to-GDP ratio is around 39%, compared to Nigeria’s less than 10%. Germans, earning €58,597 annually, pay 42% of their income in taxes. In contrast, Nigerians are unlikely to accept such high tax rates, posing a challenge for government funding.

Oil revenue also paints a grim picture. Saudi Arabia, with 35 million people, earns $350 billion from oil annually—$10,000 per person. Nigeria, with a population of 220 million, generates about $36 billion from oil, translating to $150 per person. Even Qatar, with just 2.6 million people, earns $68 billion annually, more than double Nigeria’s revenue.

In terms of oil wealth, Nigeria is relatively poor. We produce 1.5 million barrels daily for 220 million people, whereas Ghana produces 200,000 barrels daily for 32 million people.

With minimal tax contributions and insufficient oil revenue, Nigeria must either borrow, print money, or allow market forces to dictate fuel prices. Artificially controlling fuel prices through subsidies is unsustainable and could lead to bankruptcy. The alternatives are either accepting higher taxes or letting market dynamics regulate fuel costs. Without these measures, Nigeria will continue to face inflation and rising commodity prices.

Protests and riots won’t alter these economic realities; they are akin to a child’s tantrum over unmet desires.