Ending fuel subsidy in Nigeria 'sensible first step' towards ending corruption

Removing oil subsidy in Nigeria is a crucial first step towards tackling corruption and stabilising fuel prices, a UK-based senior consultant has told IBTimes UK. Nigeria is Africa's biggest oil producer, but its lack of refineries means that the country has to export about 90% of its crude oil and import back petroleum products at international prices. The government then sells fuel to Nigerians at subsidised rates and reimburses the difference to importers.

"Oil is at the centre of Nigerian economy and corruption within the oil industry lies at the heart of oil subsidy in the country," Peter Walker, director of Pielle Consulting Ltd, told IBTimes UK. "People who are importing the petrol, collect the subsidy without unloading the ship and then they take it to non-territorial waters and then bring it back to dock and claim subsidy all over again. President Muhammadu Buhari is trying to stop this. There is also a big problem of oil pipelines attacks, an estimated 100,000 barrels of oil per day are stolen in the country, that means 20% of the money goes missing."

The country's foreign minister recently announced that petrol prices would rise by two-thirds, with a litre of petrol now costing 145 naira (£0.50), up from about 86.5 naira. The prolonged fuel scarcity in the country meant that Nigerians were already paying prices considerably higher – up to 250 naira – than the the price established after the subsidy was scrapped.

Although the move has been met with anger by many Nigerians, Walker believes the decision is a risk worth taking to solve the country's problems of costly subsidy, fuel shortages and oil thefts. "It is going to have an inflation impact on the economy because you don't have a sophisticated transport system. It is going to have an impact on most people who rely on the use of cars and there will be problems in northern Nigeria, because of transportation costs," he said.

"But the price of oil and refined petroleum have been at the lowest point for some time and removing the subsidy can be a way to stabilise the prices. There is no doubt that the government and the president are taking a political risk and it is a risk that somebody has to be strong enough to take. What we need now is a period for this to settle in."

Buhari, who took office in May 2015, has often been urged to end oil subsidy and privatise the country's oil refineries, so that the state would not spend money on yearly maintenance programmes. In July 2015, three out of the four refineries in Nigeria resumed production after undergoing a restructuring programme. "If the four refineries worked at their full capacity or even at two-thirds, they could largely meet Nigeria's internal requirements," Walker concluded.

In 2012, the previous administration led by Goodluck Jonathan, attempted to end subsidies by doubling the price of a litre of petrol overnight, angering citizens who argued that low prices were the only benefits they enjoyed from the oil-rich nation. The government subsequently made an about-turn on its decision following violent protests.

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