Nigeria will slash petrol subsidies by 90% this year because government revenues have been hit by the slump in oil prices, Reuters reports.
The Federal Government had last year said it would gradually phase out fuel subsidies which are a significant burden on public finances, but cutting subsidies risks aggravating a fuel crisis in the country. This began with a reduction in fuel price to N87 from N97 a move that was mostly influenced by the decline oil price rather than an absolute cut in subsidy prices.
Major cities are experiencing a crippling gasoline shortage as oil importers feel the pinch from unpaid government subsidies, a plummeting local currency and tighter credit lines triggered by lower crude prices, oil traders and local industry sources say.
The National Assembly has recently approved the reduction in subsidies to N100 billion ($505 million) for 2015, Finance Minister Ngozi Okonjo-Iweala said late on Tuesday. The cuts were accounted for in last week’s 4.49 trillion naira budget for 2015, but the breakdown was not announced until Tuesday. Lawmakers also approved 45.5 billion naira for a separate kerosene subsidy.
Nigeria tried to end subsidies in 2012 doubling the price of a litre of petrol overnight to 150 naira ($0.93), from about 65 naira, in efforts to cut government spending and encourage badly needed investment in local refining.
The move angered citizens who see cheap pump prices as the only benefit they derive from living in an oil-rich country and lead to 8 days of nationwide strikes. The government later reinstated part of the subsidy to end the strikes.