Africa

Nigeria seeks to extend fuel subsidy program

Published : January 26, 2022 14:20 IST

An attempt by the government to remove oil subsidies could anger Nigerians. Photo: AFOLABI SOTUNDE/REUTERS

The Nigerian government had previously planned to phase out the gasoline subsidy program, calling it "unsustainable."

The Nigerian government on January 25 said it intended to extend a costly fuel subsidy program, in a reversal of policy for the oil-rich African country. Minister of State for Petroleum Resources Timipre Sylva told reporters that the government "was not removing subsidies" after meeting Nigerian President Muhammadu Buhari on January 25.

What do we know so far?

The program, known as the Premium Motor Spirit subsidy, artificially keeps everyday gas prices low for Nigerian consumers. The government has previously sought to phase out the program by this summer, with Finance Minister Zainab Ahmed calling it "unsustainable." She said the program cost $7 billion (€6.2 billion) a year in revenue. According to research by Eurasia Group, Nigeria's government spent more on subsidizing fuel at the pumps between January and August 2021 than it did on its entire health or education budgets in 2020.

In 2021, Ahmed proposed replacing the program with an initiative to give 5,000 naira (€10.70, $12) directly to the poorest Nigerian families instead of providing cheaper fuel for all. Yet any attempt to end the program has been met with fierce opposition from labor unions and working-class Nigerians. Protests against the potential phaseout of the program were expected on January 27. Unions have also urged the government to expedite work on upgrading Nigeria's four major oil refineries, with the oil-rich country currently dependent on foreign imports of refined petroleum products.

Ahmed has acknowledged that cutting the program at this time could put an additional financial burden on Nigerians. "It's become clear that the timing is problematic, that practically there is still heightened inflation and also the removal of subsidies would further worsen the situation and thereby imposing more difficulties on the citizens," Ahmed told Nigerian senators earlier this week.

Subsidy program phaseout could influence upcoming election

Cutting the subsidy program could exacerbate tensions ahead of Nigeria's presidential election in February 2023, with Nigerians voting to replace incumbent President Buhari. Previous President Goodluck Jonathan also toyed with ending the costly policy, only to back down when facing public and military protests.

Nigeria is the largest oil and gas producer on the African continent. Oil is a major engine of the Nigerian economy, with the industry also at the center of corruption scandals in recent years.

wd/msh (AFP, Reuters)