FG defends fuel subsidy removal to unions, public

Business Day

22 December 2011

FG defends fuel subsidy removal to unions, public

 Nigeria's finance minister, oil minister and central bank governor went on a joint charm offensive on Thursday to defend unpopular plans to remove a fuel subsidy they said was wasteful and would bankrupt future governments if not tackled. Speaking from a podium at a town hall forum in the commercial capital Lagos, the three tried to persuade labour and transport unions, civil rights groups, market women and a lawyers' association - all bitterly opposed to the subsidy removal - that Africa's second biggest economy had no choice.

Letting markets determine the pump price of petrol in Nigeria would push it up to 120 naira ($0.74) per litre, Finance Minister Ngozi Okonjo-Iweala said, from 65 naira, but it would save over 1 trillion naira ($6.13 billion) in subsidies in 2012. President Goodluck Jonathan wants to phrase out the subsidy as soon as possible next year, but previous attempts have been caught up in rancorous debate.

Many Nigerians feel the subsidies are the only benefit they get from living in an oil-rich state. Nigeria produces more than 2 million barrels per day of crude oil but a lack of investment in refineries and infrastructure means almost all of this is exported, while refined fuel products such as petrol have to be imported at great cost, making the subsidy a huge drain on public finances.

Central Bank governor Lamido Sanusi drew applause when he said Nigeria spent $16 billion of its foreign exchange on costly imported fuel in the first 11 months to this year - $8 billion sold by the bank to petroleum importers and a further $8 billion spent by the Treasury on the subsidy itself. "Removing the fuel subsidy is not some magic silver bullet that can solve all the problems of Nigeria ... but the burden is unsustainable on the government's finances," he said.