Nigerians Demand Cheap Gas, But Fuel Subsidies Are NOT Pro-Poor

Center for Global Development blog

6 January 2012

Nigerians Demand Cheap Gas, But Fuel Subsidies Are NOT Pro-Poor

By Todd Moss in Africa

This is a joint post with Stephanie Majerowicz.

Last Sunday the government of Nigeria scrapped fuel subsidies, leading to an immediate doubling of petrol prices. This set off violent protests across the country, threats of strikes by trade unions, and was even lamented by western pundits as a sign of government indifference to the poor. Economists of course view the move as a valiant step toward fixing a deeply dysfunctional budget system. Fuel subsidies were (directly and indirectly) draining the treasury, at a cost of up to US$8bn per year, equivalent to over 25% of the federal budget.

The rub will be if the government can make the case that there’s a better way to spend its resources than through fuel subsidies. Nigerian protesters could be forgiven for being skeptical.  Many see cheap gas as the only tangible benefit from their country’s vast oil wealth.

But fuel subsidies are a terrible way to share benefits, especially with the poor. Usually such subsidies are regressive, disproportionately benefitting the middle class and elites who can afford private cars and generators. ...