FG to keep fuel subsidies for at least another quarter

Nigeria will stick with costly fuel subsidies for now as new President Muhammadu Buhari says investigating corruption is a bigger priority than scrapping price caps on domestic fuel, Reuters reports.

Buhari was advised by his transition committee to end the subsidy programme, which critics say is expensive, inefficient and open to abuse from corrupt operators. Some analysts have said scrapping it is more pressing than ever, given a cash crunch that has forced the government to bail out state and local entities that could not cover debt payments and salaries.

But the federal government recently issued a list of companies allowed to import under the scheme for the third quarter, with almost no changes to the firms or volumes of fuel involved, which will be just over 1.5 million tonnes of petrol. For now, it looks like it will keep compensating importers for the gap between market prices and the government-imposed price cap for gasoline and kerosene.

“I have received … literature on the need to remove subsidies, but much of it has no depth,” Buhari, who was elected in March, said in a statement. Buhari also said he would “carefully review all the submissions he had received on the need to remove the subsidies”.

“It’s too sensitive at the moment,” one trader said. “There are institutions involved in the gasoline supply that, if they ceased, could create a vacuum that might create shortages in the near term.”

 

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