Nigeria U-turns on deadline to remove gasoline subsidies as protest threats mount

The Nigerian government will seek to delay a planned move to abolish subsidies on imported gasoline -- a key provision of its new oil law --, the country's Petroleum Minister Timipre Sylva said Jan. 25, as threats mount over a new wave of domestic fuel price protests.

The landmark Petroleum Industry Bill -- now known as the Petroleum Industry Act, which was signed into law Aug. 16 2021, more than a decade after it was first introduced -- had provided for unrestricted market pricing for gasoline within six months of its enactment.

However, Sylva said the government is seeking to extend the period of implementing this provision because it was not conducive to removing fuel subsidies at the moment.

"With assent by the President (Muhammadu Buhari) on Aug. 16 , 2021, the PMS (gasoline) subsidy removal was expected to take place effective Feb. 16, 2022," Sylva said at a press conference.

"However, following extensive negotiations with all key stakeholders within and outside the government, it has been agreed that the implementation period for the removal of the subsidy should be extended. We are applying to the National Assembly for amendment of the law. We are proposing an 18-month extension," he added.

Costly subsidies

Ending the costly subsidies on fuel -- which is what the government pays to gasoline marketers as the difference between the landing cost and the regulated pump price -- had been a major concern for the Nigerian government, with strong opposition from labor unions and rights groups.

The Buhari-led administration, which is contending with dwindling revenue amid a drop in oil production and exports, had toiled with ending the subsidies which it said cost Naira 714 billion ($1.5 billion) in the first nine months of 2021.

Nigeria currently caps the pump price of gasoline -- which is bought to the wholesale market on a dollar-denominated basis -- at Naira 162.5/liter (36 cents/liter). The government then provides the subsidy.

Despite being Africa's largest oil producer, Nigeria imports almost all the gasoline it consumes locally, estimated at 1.25 million mt/month, due to the poor performance of the four state-owned refineries. The plants, with a combined nameplate capacity of 445,000 b/d, have been shut for repairs for many years, and the government is currently working on overhauling them.

Vocal opposition

Nigeria Labor Congress, the umbrella body of Nigerian workers, was gearing up for a nationwide protest against the subsidy removal slated for Jan. 27.

Ayuba Wabba, the NLC president, on Jan. 24 insisted that ending the fuel subsidy would increase the domestic pump price of gasoline and inflict more hardship on the workers.

"The hike in the pump price of petrol and other refined petroleum products is a transfer of government failure and inability to effectively govern the country," Wabba said in a statement.

Nigeria has repeatedly attempted to tackle its decades-long dependence on fuel subsidies, with periods of weak international pricing generally seen as more conducive to such reforms, which are politically highly sensitive.

Removing subsidies on gasoline, or premium motor spirit as it is known in Nigeria, has always been unpopular. When former President Goodluck Jonathan announced such a move in 2012, massive fuel price protests brought the country to a standstill, forcing him to rollback the decision.

Nigeria looked to have finally got rid of fuel subsidies when in June 2020 the state fuel pricing regulatory agency, the Petroleum Products Pricing Regulatory Agency, removed the price cap that was in place for the domestic retailing of gasoline and said it had moved to a market-based pricing regime for it. President Muhammadu Buhari later restored subsidies following strong opposition.