Buhari removes oil subsidy

A significant development in Nigeria's economy!

On June 11, 2020, President Muhammadu Buhari announced the removal of fuel subsidy in Nigeria, effective from June 12, 2020. This decision was made after a meeting with the Federal Executive Council (FEC) and the National Economic Council (NEC).

Here are some key points to note:

  1. Why the removal: The government cited the need to reduce the burden of fuel subsidy on the national budget, which has been a significant drain on resources. The subsidy has been estimated to cost around N1.3 trillion (approximately $3.4 billion) annually.
  2. New fuel price: The removal of subsidy means that the price of fuel will be determined by the market forces, leading to an increase in the pump price of fuel. The new price is expected to be around N212 per liter (approximately $0.55 per liter), up from the current subsidized price of N162 per liter (approximately $0.41 per liter).
  3. Impact on economy: The removal of subsidy is expected to have both positive and negative impacts on the economy. On the positive side, it could lead to increased revenue for the government and reduced corruption associated with fuel subsidy. On the negative side, it could lead to increased costs for consumers, potentially affecting inflation and economic growth.
  4. Mitigating measures: To cushion the impact of the price increase, the government has announced plans to provide support to vulnerable groups, including the poor and low-income households. This includes increasing the budget for social welfare programs and providing assistance to small-scale businesses.
  5. International reactions: The decision has received mixed reactions from international organizations and countries. Some have expressed concerns about the potential impact on the economy and the poor, while others have praised the government's efforts to reform the fuel sector.

Overall, the removal of fuel subsidy is a significant step towards reforming Nigeria's fuel sector and reducing the country's dependence on imported fuel. However, it also poses challenges for the government and the economy, and it remains to be seen how the country will adapt to the new fuel price regime.