Should Nigeria learn from Angola regarding fuel subsidy?
Angola, Africa’s largest producer of crude oil, has removed subsidies on fuel prices. Reuters news agency reported that the Angolan government’s decision to remove the subsidy triggered an increase in the price of fuel, while the country’s equivalent of the Nigerian National Petroleum Corporation (NNPC), Sonangol, declared that the removal of fuel subsidy was aimed at easing the government’s burden amidst the fall in global oil prices.
In the last year, Angola’s currency, the Kwanza, fell against the dollar by about 30 percent, similar to Nigeria. In addition, both the Angolan and Nigeria governments have spent billions of dollars in an attempt to defend their local currency. Angola spent over $1 billion defending the Kwanza while the Central Bank of Nigeria (CBN) has spent around $5 billion between January and July, last year, defending the Naira.
Despite frantic efforts by the CBN to strengthen the Naira, the policies they implemented do not appear to be recording positive results. The Naira has lost more than 40 percent since the beginning of last year, weakened by a slide in oil prices. The IMF, in the last quarter of 2015, advised the country to devalue the Naira amidst economic uncertainty but, the CBN has maintained its stance on not devaluing the currency.
Having spent about $35 billion (N6.9 billion) between 2010 and 2014 to subsidise petroleum products, according to the World Bank, the federal government was unable to accumulate revenue in its excess crude account. It was further disclosed that the federal government, as of December 2015, spent more than N1 trillion on fuel subsidy which should alert relevant government officials to rethink the matter. In Angola, the resultant impact of the removal of subsidy saw a 39 percent rise in fuel price per litre to 160 Kwanza ($1.19) per litre and diesel by 80 percent to 135 Kwanza. Unlike Nigeria, the recent price of petrol at N86 instead of the N87 shows that the removal of fuel subsidy lacks reality despite the claims of the federal government to remove subsidy this year and increase the price of petrol per litre from N87 to N97.
It appears that Angola has finally listened to the IMF’s call to remove fuel subsidy and it may be wise for the Nigerian government to follow suit.
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