By WALE AKINYEMI

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In his inauguration speech, Nigeria President Bola Tinubu declared that Nigeria was going to stop subsidising the price of fuel. This was a very bold step from a president on day one. Now, no president before him had been successful in doing this.

Former president Muhammadu Buhari, once termed the subsidy a fraud yet his administration paid over $26 billion subsidising the cost of fuel. Former president Goodluck Jonathan tried to remove the subsidy and Nigeria came to a screeching halt for about two weeks. In the end, the subsidy was reinstated.

So, before we delve deeper into this, what exactly is the fuel subsidy?

Imagine you cultivate maize on a farm. The usual process is that the maize goes from the farm to the millers who process it into flour, from which we get our ugali. However, if all the millers around you are broken down and non-functional, you will have to export the maize to nations with working millers.

People have been buying the finished product at $100 per tonne, but exporting the maize to import the flour will definitely drive up the cost, and one does not need to be an economist to understand this.

This is what has happened in Nigeria. The nation has crude oil, but the refineries were broken down, and so the crude oil (maize) had to be exported to Europe for refining (millers). The refined product was then sold back to Nigeria at a much higher price.

Now, because this transaction is conducted in dollars, it was sucking up the bulk of dollars available to Nigerian society.

Hence, the astronomical exchange rate because the demand for dollars was simply not being met by the central bank. With demand outweighing supply, the cost of acquiring dollars was constantly rising.

So, to understand this better, if you were selling the maize to the foreign millers at $100 per tonne and you bought the processed maize flour at $500 per tonne, you have to cushion the effect of this on the people. The government then decides to pay the balance of $400 per tonne. That is what’s called the subsidy.

So, the new president’s announcement that the subsidy was gone sent shock waves across the nation. Before the pledge, the cost of fuel was 195 naira ($0.41) per litre, but soon after, the price shot up to 536 naira ($1.13) per litre.

Interestingly, the daily consumption of petrol before subsidy removal was 69 million litres per day. After subsidy removal on May 30, consumption fell to 13 million litres per day. That drop is too significant to be a result of people not being able to afford the new prices.

So, it does appear that the amount was inflated, and the oil importers were raking in billions of dollars every day. And this is why it has been impossible to deal with the subsidy issue before now. Clearly, there are powerful forces profiting from it and many sit at the head of the table .

These people are from different tribes and religious persuasions, meaning, corruption hac no tribe, gender religion. People are drawn together by their interests.

This is one of the most powerful factors when it comes to building consensus. Could president Tinubu emerge as the great consensus builder and deal maker? Even Labour unions decided to call off strikes this time round.

There is much to learn on the ecosystem required for effective leadership.

More on this next week.

Wale Akinyemi is the founder of the Street University Email [email protected]