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|**Country E R Pricing policy and**|**strate**|**gy**|||
|---|---|---|---|---|
|communication and|prepar|ation of|the miti|gation measures. The<br>|
|2013 budget allocat<br>program.|es ₦27|3.5 billi|on (US$|1.7 billion) for the SURE<br> <br>|
|**Protests**: Gasoline<br>labor unions strongl<br>price increase in Jan<br>estimated to have co<br>**Consequences of s**<br>increased six-fold in<br>surpassed US$11 bi<br> <br>|pricing<br>y oppo<br>2012,<br>st the e<br>**ubsidie**<br>local<br>llion in<br>|has bee<br>se dere<br>the uni<br>conom<br>**s**: Fuel<br>currenc<br>2011, <br>|n highly<br>gulation.<br>ons stag<br>y more t<br>subsidie<br>y betwee<br>constitut<br> <br>|politicized in Nigeria and<br>Immediately after the<br>ed an eight-day strike,<br>han US$1 billion.<br>s (implicit and explicit)<br>n 2006 and 2011 and<br>ing4.7% of GDP:<br> <br> <br> <br> <br> <br> <br>|
|Year<br>2006|2007|2008|<br>2009|2010<br>2011|
|US$billion<br>2.0|2.3|5.4|2.7|5.3<br>11.4|
|% of GDP<br>1.3|1.4|2.6|1.6|2.3<br>4.7|
|_Souces_: IMF for 2006|–2010,|and the|Central|Bank of Nigeria as cited in|
|Nigeria (2012) for 201<br>A market with dereg|1.<br>ulated|diesel|and regu|lated gasoline prices is|

# **Fuel supply conditions**

<mark>US$2/liter at times, several times the official price.</mark> **<mark>Smuggling</mark>** <mark>: Fuel is smuggled to Benin, Cameroon, and other countries. The gasoline price increase in Jan 2012 led to fuel shortages and price hikes in the neighboring countries, which were relying on cheap smuggled fuel from Nigeria.</mark> <mark>A market with deregulated diesel and regulated gasoline prices is unusual, leading to much greater apparent consumption of gasoline than diesel. According to IEA data, the gasoline-to-diesel consumption ratio increased from 2 in 2000 to 7 in 2010, nearly triple the second highest ratio in the world (United States) and possibly suggesting increasing smuggling of subsidized gasoline. Five illegal alternative markets for subsidized kerosene have been reported in the media: (1) much higher prices of kerosene on black markets, (2) adulteration of diesel with kerosene, (3) diversion of subsidized kerosene for household use to the aviation fuel sector, (4) out-smuggling to neighboring countries, and (5) presenting subsidized kerosene as having just been imported to claim the subsidy reimbursement for the second time. In Dec 2011, Major Oil Marketers Association of Nigeria warned that selling household kerosene as jet aviation fuel posed a serious safety threat. The scale of corruption also discredits government’s argument that savings from subsidy removal can be used more productively and equitably. A former secretary general of a workers’ union captured this sentiment as follows: “Until they stop corruption, all these ideas will not work... Nigeria is rich, we have money.”</mark> **<mark>Investigations into subsidy abuse</mark>** <mark>: Protests against the gasoline subsidy removal in Jan 2012 and criticisms of the poor governance in the sector led to establishment of several government committees and task forces in 2012:</mark>

- <mark>In Jan, the House of Representatives named an eight-member ad hoc committee led by Hon. Farouk Lawan to probe the subsidy regime between 2009 and 2011”to verify and determine the actual subsidy requirements and monitor the implementation of the subsidy regime in Nigeria.” The committee’s report, submitted in Apr, pointed to abuses on an enormous scale and massive overpayments in 2011. Against the appropriated sum of ₦245 billion (US$1.6 billion), the committee found effective subsidy payments amounting to ₦2,587 billion (US$16.7 billion). The number of eligible importers increased sharply from six in 2006 to 140 by 2011. Many transactions appeared suspect. However, a bribery allegation against Hon. Lawan led the executive branch to establish its own committee.</mark>

- <mark>Federal Ministry of Finance set up a committee in May to scrutinize the fuel subsidy payments in 2011. Headed by Aigboje Aig-Imoukhuede, a member of the Economic Management Team, the committee submitted a report in July, claiming that marketers and importers had committed 17 infractions at a cost of ₦423</mark>