The Implications of Fuel Subsidy to Nigerian Economy

1457 words 6 pages
Extra Credit Assignment – The Implications of Fuel Subsidy to Nigerian Economy
Babandi Ibrahim Gumel
Doctor of Business Administration
California Southern University
Mike Ewald, PhD
November 2015

Introduction This paper would discuss the implications of fuel subsidy in the Nigerian economy. It is a position paper as an extra credit assignment for ECO 87501 for DBA course at California Southern University. The paper would review what subsidy is, the reason for subsidizing petroleum product in Nigeria, challenges the Nigerian economy is facing because of subsidizing petroleum products, and the crisis the country is facing because of subsidy.
According to the dictionary of Investopedia, “subsidy is a benefit given by the
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The question always is the petroleum product subsidy reaching the masses. Is the subsidy payment sustainable in the current market glut of petroleum products in the world? Is the subsidy helping the masses or is just a gimmick? The answers are always answered half way since leaders of Nigeria have been trying to justify to the general public that it is not feasible to continue with payment of subsidies, and attempts were made to remove it, but public protest prostrate such attempts. According to a report by the United Kingdom Department of International Development, Nigerian Government subsidizes petroleum products by 50%, and the subsidy payment is to the companies that supply the products to the consumers. Which some actors in the Nigerian industry have been screaming about foul play in the payment system of subsidy to the extent of calling the system a cabal, the population does not agree with the removal of the petroleum subsidy. Along the line of subsidy removal, the government has reduced the level of subsidy but is still biting the Nigerian economy. Among the recommendations of the transition committee that organized the handing over of governmental affairs to President Buhari of Nigeria, subsidy removal is top on the list of their reports. One key area that the committee further recommend is to reactivate the existing petroleum refineries to curtail the importation of refined products. The perception is that President Buhari is pro-masses