News ID: 270155
Published: 0756 GMT June 14, 2020

Virus crisis puts Nigeria fuel subsidy system in spotlight

Virus crisis puts Nigeria fuel subsidy system in spotlight
nairametrics.com

Plunging oil prices and collapsing state revenues have seen Nigerian authorities vow an end to a controversial fuel subsidy scheme long criticized as a graft-ridden drain on public finances.

But there are major doubts that Africa's most populous country is finally ready to wean itself off a system that has helped some in high places syphon billions from government coffers, barrons.com reported.

The fuel subsidy scheme has been described as a sprawling web of patronage and mismanagement that encapsulates the dysfunction plaguing the continental powerhouse.

Despite being Africa's largest oil producer, OPEC member Nigeria has limited refinery capacity and actually imports the bulk of its refined products, including fuel.

That fuel is then sold at a subsidized rate in an opaque system aimed at keeping average Nigerians happy — but it also left plenty of scope for corruption by officials and traders.

Over the past few months the coronavirus crisis and turmoil worldwide has upended all this.

The fall in global oil prices means that fuel coming in from outside no longer needs to be subsidized, just as Nigeria's state revenues have taken a major hit.

Taking advantage of the slump to save its much-needed reserves, the Nigerian authorities announced an end to the old system in April.

"There is no subsidy and it is zero forever," said Mele Kyari, the head of state-run Nigeria National Petroleum Corporation (NNPC).

From now on, officials pledged, the market would determine the cost at the pump.

Despite the insistence of the authorities that the subsidy system is over, many in the industry complain the government refuses to relinquish control.

So far the authorities have continued to set a pricing band that they say retailers must stick to.

"Nigerians shouldn't be overcharged, that's what we are saying," said Apollo Kimchi, spokesman for the state Petroleum Products Pricing Regulatory Agency.

"We advise marketers — this is how you sell, you shouldn't go above (this) price because if you go above it, you will be exploiting people, that’s it."

For Tunji Oyebanji, chairman of the Major Oil Marketers Association of Nigeria, official action has fallen well short of the pronouncements.

"We don't really understand what the government is up to," he said.

"Where are (the) market forces determining price in this?"

His organization — which represents large filling station owners — has long pushed for the government to let pump prices go free.

"We maintain that a full deregulation and liberalization of the downstream sector is the solution," Oyebanji said.


 

   
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