Energy Subsidies in Nigeria

A new report from IISD's Global Subsidies Initiative (GSI), entitled Gender and Fossil Fuel Subsidy Reform, suggests that the reform of fossil fuel subsidies should focus assistance towards women in poverty.

This report explores current knowledge on energy subsidy reforms and gender through a review of existing literature. First, it sets out the global context of energy subsidies, energy access and gender empowerment. It then reviews literature on gender, energy access, fossil fuel subsidies and mitigation measures related to subsidy reform, such as cash transfers. Finally, it provides an overview of these issues across three focus countries: Bangladesh, India and Nigeria, as well as case studies on Peru, Mexico and Morocco.

It is well understood that increasing fuel product prices can be a shock for low-income households, requiring careful mitigation strategies to ensure that subsidy reform does not harm the most vulnerable.

Kerosene subsidies are expensive: estimated to be more than US$ 4 billion in West Africa and more than US$ 5 billion in India. What are governments—often with highly limited resources—achieving by spending all this money? And with an increasing number of countries committing to reform subsidies, what will it mean for energy access if these policies are removed?

The downturn in oil prices over the past year has hit Nigeria’s public budget hard. When money is tight, it seems obvious that governments should first phase out programmes that are expensive and have low benefit to their intended beneficiaries.

Nigeria appears poised to end fuel subsidies, an unpopular move in the oil-rich nation where citizens have come to expect cheap fuel as one of their few government benefits, reports Bloomberg. The government submitted a three-year plan to lawmakers proposing to save US$ 8 billion by phasing out subsidies starting from the 2012 fiscal year. The plan says part of that amount can help the poor.

A summary of major events in April and May 2011.

The Nigerian federal government has announced plans to cut its subsidies for petroleum fuels, saying that the price tag has become unaffordable. According to the federal government, Nigeria spent over US$4.3 billion on petroleum fuel subsidies in 2008. Despite its significant oil reserves, Nigeria imports much of its petroleum products, before selling them at below market rates.