Nigeria lawmakers investigate $7.7 billion fuel subsidy

October 13, 2011 | Africa

Nigeria_National_Assembly

Nigerian lawmakers pledged on Wednesday to investigate fuel subsidies which the government has said will cost Africa’s largest crude exporter 1.2 trillion naira ($7.67 billion) this year and should be scrapped.

Nigeria produces more than 2 million barrels per day of crude oil but a lack of investment in refineries and infrastructure means almost all of this is exported, while refined fuel products like diesel have to be imported.

“The Senate committees on Petroleum Resources (Downstream), Appropriation and Finance to investigate the operation of the fuel subsidy scheme,” a resolution from the upper house of the national assembly said.

The 2011 budget stated that the subsidy would cost 240 billion naira but the government has pushed up the estimate by almost five times, undermining the whole implementation of the spending plans, the Senate noted.

The powerful governors of Nigeria’s 36 states have already given the government their support and it will now be a case of lobbying lawmakers, who can often be the hardest to convince as years of wrangling over the oil reforms have proven.

Fuel subsidies have been a long-standing policy for Nigerian governments to ease the cost pressures on Africa’s most populous nation, where many live on less than $2 a day.

Ending the subsidy has been met with widespread optimism by international investors, who believe it is inefficient, fuels corruption and holds back sub-Saharan Africa’s second-largest economy from reforming its downstream oil sector.

But many Nigerians view the subsidy as the only benefit they get from living in an oil-rich state and say they would like to see the government cut costs from wealthy politicians before asking more money from subsistence workers.

The government said it would use the savings accrued from ending the subsidies to provide safety nets for poor segments of society but this has not convinced many residents in a country which is thwarted by corruption and mismanagement.

“Can’t the government feel the poverty among the people? Are they no longer interested in the peaceful co-existence they have been preaching? Let us see government officials give up some money before they come to us,” said Abdulmuminu, a rice farmer in northeast Borno state.

The central bank has been raising interest rates for more than a year to tackle high inflation and a weakening local currency. The upcoming removal of fuel subsidies has been cited several times as a major factor in monetary policy.