‘Drop In Oil Price, Chance To End Fuel Subsidy’

The tumbling price of oil that has slashed Nigeria’s revenue and shaken currency and stock markets presents Nigeria with an opportunity to discontinue fuel subsidies that amount to $7billion annually, reports Bloomberg.

However, some analysts say that President Goodluck Jonathan may not explore such option with elections in view in February.

“Politics often trumps prudence and there’s an entrenched social expectation for fuel to be subsidized,” said Gareth Brickman, an analyst at Johannesburg-based ETM Analytic, who was quoted by Bloomberg.

“The last time subsidies were reduced, there were widespread protests, and given how contentious the political environment is in Nigeria with the elections and ongoing ethnic divisions, it is likely this will be the case again.”

Managing director of BIC Consulting, Dr. Boniface Chizea, concurs that “the president appreciates that fuel subsidy is a hot potato with elections in view”.

For his part, the president, Independent Shareholders’ Association of Nigeria (ISAN), cautioned that oil slump is just under a few weeks, and therefore not enough reason to rush into removing fuel subsidy, which could backfire when oil prices recover.

“I am an advocate for the removal of fuel subsidy in the oil sector but we do not need to make such decision in haste. We must be very careful,” Nwosu warned.

However, Chizea said it is possible to remove fuel subsidy but with a proviso that the “landing cost must be at least at N97 for it to happen. And that should not in any way translate to increase in pump price as being speculated.”

Source: Leadership.ng