President Muhammadu Buhari has been advised by a transition committee to embark on cutting fuel subsidy and to privatize the four refineries in Nigeria. This is according to what a senior party in Buhari’s party told Reuters last Sunday.
As Africa’s biggest economy, most populous nation and the leading oil producer. Nigeria could do better had its oil industry rely heavily on subsidies, underperforming refining industry and importation of petroleum products. It has been revealed that the Nigerian government is paying a subsidy to the tune of over $6 billion in fraudulent claims that supposedly happened in 2012. The initiative is proving to be an expensive undertaking for the government.
President Buhari, with a little over three weeks in office officially, is said to be considering the recommendations suggested in the strategy report. Made by a 19 member committee constituted from the All Progressive Congress (APC) party.
On condition of anonymity, a senior APC source told Reuters: “The removal of the fuel subsidy is one of the recommendations of the transition committee. The committee also suggested to Mr. President that the four refineries be privatized so that the government stops wasting money on annual turnaround maintenance.”
Another APC source also told Reuters that they made these recommendations and more in a report handed to the President this month.
Nigeria’s former President, Goodluck Jonathan made up to 90% cut in oil subsidies in the 2015 national budget. This action was largely in response to the falling global oil prices that translated to low revenues to the government from the petroleum sector.
However, subsidies cut have not always worked out as hoped. Three years ago, Nigeria tried to do away with subsidies, and the country was hit by high fuel cost (the prices almost doubled) overnight. This action led to a widespread feeling of anger and disappointment by the Nigerian citizens, who see cheaper pump prices as an imperative benefit they should be getting from the government of an oil-rich nation. The citizens went on nationwide strikes lasting eight days and arm-twisted the government to revert its stand on oil subsidies.
It is these very same prospects of oil subsidy removal that led to the widespread fuel shortage evidenced in Nigeria in the final days of Jonathan’s government. The importers of oil had gone on strike demanding the government to pay them what is owed to them.
The state-owned Nigerian National Petroleum Corporation (NNPC), last week said, that the country’s four oil refineries will resume production come July. The country’s ailing refineries run below their capacity, sometimes achieving only 20% of its potential. This inefficiency has been attributed to pipeline sabotage and neglect.