Nigeria cuts domestic fuel prices, ending controversial gov’t oil subsidy

Global Business

Nigeria has announced a 10 percent cut in the local pump price of petrol following the continued decline in global oil prices. A liter of fuel now sells for 87 naira, around $51 cents. Analysts said the new pricing template effectively cancels a controversial government subsidy on petrol. CCTV Africa’s Deji Badmus reported this story from Lagos, Nigeria.

Nigeria cuts domestic fuel prices, ending controversial gov\'t oil subsidy

Nigeria has announced a 10 percent cut in the local pump price of petrol following the continued decline in global oil prices. A liter of fuel now sells for 87 naira, around $51 cents. Analysts said the new pricing template effectively cancels a controversial government subsidy on petrol. CCTV Africa's Deji Badmus reported this story from Lagos, Nigeria.

For as long as global crude oil prices have fallen, the government has come under intense pressure, especially from labor unions, to reduce the domestic pump price of oil.

Domestic prices are typically not dictated by global crude prices in Nigeria as the government subsidizes domestic consumption of petrol. But with Nigeria’s Brent crude now falling to $49 per barrel, the subsidies have now been completely eroded, leaving the government with no choice but to cut prices.

“It has no effect yet on taxi fares, but I must confess it’s quite commendable,” Lagos resident Tony Ede said.

The cuts mean that the controversial issue of petrol subsidies is no more. Past attempts by the government to end the subsidies have always been met with resistance. While it’s not clear whether the government would reintroduce the subsidy when global oil prices begin to climb, energy economists said it is possible.

The fall in global oil prices has also caused some mix reactions in Nigeria. Most people want prices to continue to fall so that domestic pump prices will continue to go down. While the government is praying fervently that crude prices go up, to generate badly-needed revenue.