The World Briefly
June 02, 2023Bursting Bubbles
Nigeria
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The price of petrol in Nigerian government-run stations tripled this week just days after newly-elected President Bola Tinubu announced he would scrap fuel subsidies, a move that has sparked panic among citizens over inflation, Agence France-Presse reported.
Soon after taking office Monday, Tinubu pledged to expand Nigeria’s economy by at least six percent, stabilize the foreign exchange rate, and combat rising insecurity in the country.
He added the “fuel subsidy is gone,” an announcement that confused many in the West African country. The government of his predecessor, Muhammadu Buhari, had budgeted for subsidies until the end of June.
But on Wednesday, fuel prices at government-owned gas stations surged from $0.4 to $1.2 per liter, suggesting that the subsidies had already been scrapped. The Nigerian National Petroleum Corporation also released a statement confirming that prices “will continue to fluctuate to reflect market dynamics.”
The changes prompted concern in Nigeria, where according to the World Bank more than 80 million people out of a population of 213 million live below the poverty line.
There were reports of people rushing to get fuel, and lines for gas stations blocking major roads. Some called the government’s move “madness” and expressed dismay that the changes will impact the price of essential goods.
Nigeria is rich in oil but has inadequate refining capacity. Since the 1970s, Nigerians have had government subsidies for fuel, which have caused a huge drain on revenues, foreign exchange, and contributed to ballooning debt.
Previous attempts to remove subsidies have been met with rage, including in 2012 when the army clashed with protesters demonstrating over fuel costs.
The fuel subsidy issue is only one of the many challenges Tinubu will face as he tries to promote economic growth, analysts told CNBC.
The former governor of Lagos state inherits an economy burdened by soaring debt and inflation levels reaching the highest point in nearly 20 years, surpassing 22 percent.
Tinubu will also have to address the widespread violence in Nigeria, including killings and kidnappings in the northwest, as well as separatist and gang-based attacks in the southeast.
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