Scrapping the fuel allowance will help save 1.2 trillion naira ($7.5 billion) a year, according to the three-year spending plan President Goodluck Jonathan sent to parliament in October.
“By this announcement, the downstream sub-sector of the petroleum industry is hereby deregulated,” Reginald Stanley, executive secretary of the Petroleum Products Pricing Regulatory Agency, said in the statement. “Service providers in the sector are now to procure products and sell same in accordance with the indicative benchmark price to be published fortnightly and posted on the PPPRA website.”
The proposal, which central bank Governor Lamido Sanusi said will boost inflation in the “short term,” is unpopular among Nigerians and has been extensively debated in parliament. The country’s two main labor federations, including the oil unions, have threatened to call a general strike if the regulated price regime is ended.
While Nigeria’s House of Representatives, the lower arm of parliament, approved the spending plan, it rejected the removal of fuel subsidies as being “premature,” John Enoh, chairman of the joint house committee on finance, appropriation, budget and planning, said Dec 2.
The Senate, the upper house, can still approve the move and ensure industry deregulation is implemented.
Nigeria has paid 3.65 trillion naira in domestic fuel subsidies since 2006, with more than a third spent in 2011, according to the PPPRA. The government spent 1.35 trillion naira in the first nine months of last year, Stanley told a parliamentary hearing on Dec. 2.
Nigeria, Africa’s most populous nation with more than 160 million people, imports 70 percent of its fuel products due to a lack of adequate refining capacity, Petroleum Minister Diezani Alison-Madueke said on Nov. 22.