Oil-rich Nigeria stops fuel subsidies

Nigeria is ending fuel subsidies, an official has said, a move that is sure to be unpopular in the oil-rich nation where citizens have come to expect cheap fuel as one of their few government benefits.

The Petroleum Products Pricing Regulatory Agency will stop paying the subsidy to petroleum importers effective immediately, said executive secretary Reginald Stanley in a statement on Sunday.

The government has said the move will save the country some $US8 billion ($A7.91 billion), some of which will be dedicated to much-needed infrastructure projects. Previous attempts to lift the subsidies have been met with nationwide strike actions.

"Consumers are assured of adequate supply of quality products at prices that are competitive and non-exploitative and so there is no need for anyone to engage in panic buying or product hoarding," the statement read.

However, less than an hour after Sunday's announcement, some gas stations in the commercial capital of Lagos had stopped selling gas, presumably in the hope of selling it post-subsidy for more than the current price of about $US1.70 ($A1.68) per gallon, or US45 cents (A44.52 cents) per litre.

A similar move in neighboring Ghana last week raised prices by about 15 per cent, said oil and gas analyst Dolapo Oni.

Nigeria, an OPEC member nation producing about 2.4 million barrels of crude oil a day, is a top supplier to the United States, but virtually all of its petroleum products are imported after years of graft, mismanagement and violence at its refineries.

Consumers in Nigeria find themselves having to line up for hours whenever events affecting the price or distribution of fuel trigger panic buying or hoarding. Nigerians rely heavily on fuel not only for their cars, but also to power the generators that many homes and businesses use to compensate for the nation's epileptic power supply. They consume more than nine million gallons (about 35 million litres) of fuel per day, according to a report from the regulatory agency.

"The bill of the fuel subsidy rose so much over the last year," said Oni.

"It is partly due to corruption, but also due to Nigerians' growing consumption."

The Nigerian Labor Congress declined to immediately comment, but had previously said they would fight any attempt to lift the subsidy.

Potential unrest over the subsidy removal would likely add to Nigerian President Goodluck Jonathan's security woes after he declared a state of emergency on Saturday in parts of the country affected by a growing Islamist insurgency.

In a country where people see little benefit from the country's staggering oil wealth, a culture of distrust has come to define the relationship between the Nigerian people and their government.

However, the country's respected economic team has promised that things will be different.

"Over and over, promises have been broken," said finance minister Ngozi Okonjo-Iweala, a former World Bank official, at a recent conference held in Lagos.

"Over and over, they have not seen the implementation they want take place ... This is different," she said.

Okonjo-Iweala has been pushing for the removal and mentioned lifting subsidies during her screening by the Nigerian senate before her appointment as finance minister with extended powers.

Analysts believe she expects the move will sanitize the sector of the industry responsible for selling and distributing fuel and make it more efficient.

Source: http://finance.ninemsn.com.au/newsbusiness/aap/8397457/oil-rich-nigeria-stops-fuel-subsidies

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