Egypt dumps fuel subsidy. Should Nigeria follow suit?

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Egypt has finally exited from fuel subsidy regime with its latest push, raising domestic prices by between 16 percent and 30 percent to bring them into line with their real cost, as it nears the end of an IMF-backed economic reform programme. The reform had led to a boost in investment in the oil and gas sector especially through foreign direct investment.

The price of petrol rose by 18.5 percent to $0.48 a litre, and diesel rose by 22.7 percent to $0.41 per litre. The price of cooking gas cylinders rose by 30 percent to $3.90 for domestic use and $7.80 for commercial use.

Scaling back fuel subsidies that have been a strain on the budget for decades was a key plank of a 3-year, $12 billion reform package signed with the International Monetary Fund in 2016, as Egypt’s economy struggled to recover from the turmoil that followed its 2011 uprising.

Most fuel prices are now in line with their costs, though the government is still subsidising fuel for bakeries and power generation, a petroleum ministry official said. But the changes will push up prices for transport, food products and other goods.

Energy subsidies had eaten up as much as 20 percent of the government’s budget in recent years. Analysts had speculated that government would wait until after the end of the African Cup of Nations – the continental soccer championships, which Egypt is hosting until July 19, before announcing the price rises.

The quest to wean Egypt from petroleum products’ subsidy started in 2016, a journey successive administrations in Nigeria have been too scared to try or when they do, it is done reluctantly.

Nigeria’s fuel subsidy has spiraled out of control. The subsidy costs have grown sharply from a daily average cost of … Read More...

How education, health, infrastructure suffering on back of fuel subsidy

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With over N9 trillion reportedly spent on subsidy over the last decade, Nigeria, sadly, places premium on funding of corruption-ridden fuel subsidy regime over education and health, which received only N2.1 trillion and N3.9 trillion respectively, Nigeria Employers’ Consultative Association (NECA) has said.

Against this background, NECA has again alerted to the negative economic implication of the continuation of the fuel subsidy regime, insisting it’s not only ill-advised and unsustainable, but also a misplacement of priority by the Nigerian government.

Timothy Olawale, Director-General of NECA, spoke in Lagos, in the wake of the recent warning by Lamido Sanusi, a former governor of the Central Bank of Nigeria (CBN) and Emir of Kano, that the country is at the verge of insolvency due to the trillions naira being spent to fund the subsidy regime.

NECA averred that the fuel subsidy regime constitutes a major leakage in national revenue mobilisation.

Recall that Sanusi recently stated that in 2011, the country made US$16 billion from petroleum sales and spent US$8.2 billion to subsidise imported petroleum products.

“Unfortunately, despite past sound counsel, government has refused to demonstrate the political will needed to deregulate the downstream sector of the oil and gas.

“The non-deregulation of the petroleum sector has fuelled the continued dependence on offshore sources for petroleum products, supply perennial shortage of petroleum products and unimaginable corruptions in the management of the subsidy dispensation. These remain a major concern for organised businesses,” said Olawale.

The NECA DG said there was an urgent need for the government to fully deregulate the downstream oil sector, and free the economy from dire implications of the fuel subsidy regime.

“Over the last decade, the country has spent over N9 trillion on fuel subsidy, about N15.5 trillion on capital expenditure, N2.1 trillion on health Read More...