A Citizens' Guide to Energy Subsidies In Nigeria
Most people in Nigeria see fuel subsidies as their share of wealth from the country's oil reserves. However, evidence suggests that the subsidies — worth over NGN 2.19 trillion (US$ 13.6 billion) in 2011 — mostly benefit the well-off. Significant amounts of expenditure have simply been lost to corruption. Moreover, the subsidies have increased the reliance on fuel imports and contributed to the lack of investment in oil refining capacity.
The cost of under-pricing electricity has been in the range of NGN 232.5─356.5 billion (US$1.5–2.3 billion) between 2005–2009. This has caused insufficient maintenance and reinvestment in Nigeria's electricity supply, causing serious problems with access and reliability, at high cost to businesses and the broader economy. Plans are now underway to gradually increase tariffs to cover costs in full, while maintaining a cheaper tariff for low-income consumers.
This guide provides an accessible introduction to the best available information on the costs and benefits of these energy subsidies. It provides an overview of how various types of energy are subsidized; the implications of these subsidies on various aspects of sustainable development; and how they might be or are being reformed, including a summary of lessons learned from international experience.