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Nigeria has saved USD 20 billion from petrol subsidy removal and market-based pricing of the foreign exchange rate, says Wale Edun, Nigerian minister of finance and coordinating minister of the economy.
Nigeria, one of the largest oil producers in Africa, has historically subsidized fuel prices to keep them affordable for its population. However, the current government removed these subsidies, arguing that the money spent on subsidies could be better used for development projects and improving infrastructure.
This was part of broader economic reforms aimed at deregulating the oil sector. Which could lead to more competition and, over time, might attract foreign investments and improve the local oil industry. However, it also means that the government will no longer directly control fuel prices, which could result in volatility depending on global oil prices.
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An amount of five per cent of GDP is what those two subsidies were costing when there was a subsidy on PMS; when there was petroleum product generally for a long time and when there was a subsidy of foreign exchange. Between them, they were costing five per cent of GDP, said Edun. These flows now return to the government’s coffers for further deployment of funds that could be going into infrastructure, health, social services, and education.
