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BudgIT to President Buhari: Remove Fuel Subsidy After 13 Years of N10trillion Wasteful Corruption

By Shakir Akorede

To the detriment of socio-economic developments, Nigeria has spent nothing less than

N10 trillion on petrol import subsidy between 2006 and 2018. Let it be known: Nigeria is

dancing on the edge of a razor blade by continuing its subsidy regime.

According to our recent research “Nigeria’s Petrol Subsidy Regime: Dilemma of the

World’s Most Populous Black Nation” Nigeria currently imports an average of 91% of its

daily petrol needs, thus disproportionately exposing local petrol prices to price shocks

from international factors of production and exchange rate volatility. There is a near

perfectly inverse relationship between the fall in the value of Naira and the rise in the

cost of imported petrol. That is, when next the Naira is devalued, Nigeria’s subsidy bill

can be expected to jump.
Meanwhile, the continuation of petrol price regulation perpetuates safety nests for

exceptional forms of corruption within the country's subsidy regime. Import subsidy

creates petrol price arbitrage - the differential between the regulated price in Nigeria

and the high petrol prices in neighbouring countries - which is big enough to incentivise

smuggling of subsidized products to neighbouring border towns. According to NNPC,

there are 2,201 petrol stations in Nigeria’s porous border towns and coastal frontiers,

with a combined fuel tank capacity of 144.9 million litres. Analysts argue, ringing

corruption alert, that the population around that area is far from justifying the size of

the petrol market.
BudgIT notes with dismay that “fuel subsidy” deprives Nigeria of funds needed for

critical socio-economic development as it discourages investors, who generally prefer a

deregulated industry, from investing in the downstream sector especially in the area of

refinery construction and operation. For instance, the 10 trillion consumed by the

subsidy regime is sufficient to construct 27,000MW of electricity or build about 2,400

units of 1000-bed standard hospitals across 774 local government areas of Nigeria,

found our research.
We equally note that the Nigerian masses worship low oil prices. More so, the political

class fears that increases in petrol price (and in the cost of living by extension),

occasioned by a deregulated price regime, could become a flashpoint for mass uprisings

and political instability. Nonetheless, we can never shy away from the opportunity cost

of the corrupt subsidy regime.
To the detriment of socio-economic developments, Nigeria has spent nothing less than

N10 trillion on petrol import subsidy between 2006 and 2018. Let it be known: Nigeria is

dancing on the edge of a razor blade by continuing its subsidy regime.

According to our recent research “Nigeria’s Petrol Subsidy Regime: Dilemma of the

World’s Most Populous Black Nation” Nigeria currently imports an average of 91% of its

daily petrol needs, thus disproportionately exposing local petrol prices to price shocks

from international factors of production and exchange rate volatility. There is a near

perfectly inverse relationship between the fall in the value of Naira and the rise in the

cost of imported petrol. That is, when next the Naira is devalued, Nigeria’s subsidy bill

can be expected to jump.
Meanwhile, the continuation of petrol price regulation perpetuates safety nests for

exceptional forms of corruption within the country's subsidy regime. Import subsidy

creates petrol price arbitrage - the differential between the regulated price in Nigeria

and the high petrol prices in neighbouring countries - which is big enough to incentivise

smuggling of subsidized products to neighbouring border towns. According to NNPC,

there are 2,201 petrol stations in Nigeria’s porous border towns and coastal frontiers,

with a combined fuel tank capacity of 144.9 million litres. Analysts argue, ringing

corruption alert, that the population around that area is far from justifying the size of

the petrol market.
BudgIT notes with dismay that “fuel subsidy” deprives Nigeria of funds needed for

critical socio-economic development as it discourages investors, who generally prefer a

deregulated industry, from investing in the downstream sector especially in the area of

refinery construction and operation. For instance, the 10 trillion consumed by the

subsidy regime is sufficient to construct 27,000MW of electricity or build about 2,400

units of 1000-bed standard hospitals across 774 local government areas of Nigeria,

found our research.
We equally note that the Nigerian masses worship low oil prices. More so, the political

class fears that increases in petrol price (and in the cost of living by extension),

occasioned by a deregulated price regime, could become a flashpoint for mass uprisings

and political instability. Nonetheless, we can never shy away from the opportunity cost

of the corrupt subsidy regime.