Nigeria: Buhari Should Phase-Out, Not Remove Petroleum Subsidy

opinion

Clearly, expending billions of naira on fuel subsidies is no longer sustainable, but the dependency on them needs to be addressed first. This is why phasing them out within the context of incremental deregulation, will allow time to put in place systems and structures to cushion the effect on most people, ensure that the funds are effectively and transparently reinvested, and that the government does all this with minimum political backlash. A competitive midstream and downstream oil sector is desirable but making the process of subsidy removal as painless as possible to ordinary Nigerians is the optimal scenario.

Democratic governments are likely to face two interrelated problems in implementing difficult economic reforms. First, is the unpopularity of these measures among citizens who are likely to shoulder the most burden. Second, is the difficulty in employing a practical approach to implementation. Reforming Nigeria's money-guzzling fuel subsidy regime, now an urgent matter in the context of dwindling government revenues since 2014, is both unpopular and the practicalities of its reformation are yet to be fleshed out.

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