Public transport price rises and protests likely in coming days.
Rafiu Ajakaye - LAGOS, Nigeria (AA) - Nigeria has finally phased out its fuel subsidy and pegged pump prices at $0.45 per liter, up from the $0.27 official price, junior petroleum minister Ibe Kachikwu announced on Wednesday.
The decision comes amid long fuel shortages across much of Nigeria because oil marketers are unwilling to source foreign exchange from the black market and then sell product at the official rate of $0.27.
Many of them have since refused to import fuel, leading to scarcity and hoarding.
However, Nigeria's labor movement rejected the move late on Wednesday. This raises the possibility of major protests in the coming days.
“In order to increase and stabilize the supply of the product, any Nigerian entity is now free to import the product, subject to existing quality specifications and other guidelines issued by Regulatory Agencies,” the minister said in a statement released after a meeting with labor unions, parliament leaders and other stakeholders.
Kachikwu said the decision was a hard one for the government but became necessary to end the decades of gas shortages because private investors were unwilling to import fuel at prices not beneficial to them.
“We expect that this new policy will lead to improved supply and competition and eventually drive down pump prices, as we have experienced with diesel,” he said.
“In addition, this will also lead to increased product availability and encourage investments in refineries and other parts of the downstream sector. It will also prevent diversion of petroleum products and set a stable environment for the downstream sector in Nigeria,” he added.
The Nigerian government had made several attempts to remove the subsidy but had its efforts stonewalled by unions who often brought citizens to the streets to reject the measure.
Opponents had always demanded that the government fix local refineries, among other steps, which they said were necessary before removing the subsidy.
Coming at a period of inflation of commodity goods, the decision to phase out the subsidy will initially inflict pain on the public as transport fares will likely rise in the coming days.
However, it is difficult to predict what the likely backlash from the streets will mean for President Muhammadu Buhari.