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If Nigeria’s Fuel Subsidy was Discontinued, a Significant Portion of the Savings Could be Distributed to Low-income Citizens

Nigerians are being hit from all sides by a combination of factors that are making their lives increasingly difficult. These include rising cost of living which is reflected in double-digit inflation, stagnant wages, non-payment or the late payment of salaries, a cash crunch and fuel scarcity. In recent years the World Bank has been urging Nigeria to remove the fuel subsidy. It argues that failure to do so would exacerbate the country’s fiscal challenges and worsen its debt profile. There are concerns that the removal of the subsidy will impose even further hardships on Nigerians by raising fuel and transportation costs. This would further erode their real purchasing power and increase the number of the working poor in the country. Political considerations appear to take precedence over economic logic in this debate. Previous administrations have baulked at getting rid of the fuel subsidy. Resentment toward subsidy removal can be avoided if better alternatives are explained to Nigerians.