Despite the unrest, the decision to abolish Nigeria’s fuel subsidy is the right one. In 2011 alone, Nigeria’s fuel subsidy cost the country an estimated $8 billion and the price tag for 2012 was expected to be even greater. This does not even take into account the country’s losses due to market distortions as a result of the subsidy. While politically costly in the short run, if Nigeria’s government can implement transparent and well-structured reforms, the funds from the fuel subsidy program could be put to far greater use.
With an estimated 37.2 billion barrels of proven oil reserves, Nigeria is one of the world’s largest oil producers. However, the country’s mineral riches have not resulted in a significant improvement in the quality of life for the majority of Nigeria’s citizens, 54 percent of whom live below the national poverty line. In 2010, Nigeria earned $59 billion from oil exports. Therefore, Nigeria does not lack the resources to reach its development goals, rather its resources have been utilized inefficiently.
In the wake of the global financial crisis and increasing sovereign debt risk, financing for development is drying up and developing countries must now look inward to finance their growth and development needs. Crisis times require bold reforms and President Jonathan of Nigeria has the ability to take on one of the most difficult problems in his country. But in order to succeed, he will also have to take on another challenge – transparency in the use of the $8 billion fuel subsidy funds. The government must utilize these resources more efficiently to create social welfare and infrastructure improvement programs that will not only improve the quality of life for Nigeria’s poorest but also put the country on track to meet its development goals. Read More
