The end of a popular fuel subsidy in Nigeria

Newly-inaugurated President Bola Tinubu acknowledged on Monday (12 June) his decision to eliminate Nigeria’s long-standing fuel subsidy from 1 July will “impose an extra burden on the masses of our people”.

The subsidy is popular among voters, and loathed by policymakers:

• millions of Nigerians have come to depend on it to make ends meet
• yet it costs ~$10B each year and has long encountered corruption

The last time a president tried to end the subsidy in 2012, he backtracked after a 120% price increase triggered weeks of deadly protests.

Intrigue’s take: Tinubu didn’t have a lot of options here: Nigeria was going deeper into debt to pay for the fuel subsidy each year. But he’s promising the long-term gains will outweigh the short-term pain for Nigerians, who are already living through 20%+ inflation:

• Tinubu says the savings will be re-invested in infrastructure, education and healthcare, and
• A new mega-refinery has potential to cut fuel costs in parallel

Also worth noting:

• Nigeria is Africa’s second largest oil producer. Fuel prices there have nearly tripled since Tinubu announced the policy on 29 May.
• Ratings agencies Fitch and Moody’s both say removing the subsidy will improve Nigeria’s outlook.