By Obafemi Oredein
Special to Dow Jones Newswires
IBADAN, Nigeria–Nigeria’s new President Bola Ahmed Tinubu said Monday that his administration has abolished a subsidy on petroleum products sold to its citizens.
The subsidy makes imported petrol cheaper than its actual landed cost and has been a huge drain on government revenues, according to the Nigerian National Petroleum Co. Former President Muhammadu Buhari’s administration had said that money for the subsidy would run out in June.
Mele Kyari, chief executive officer of the NNPC, said last week that subsidy bills were in excess of 400 billion naira ($864.5 million) every month for the government. Tinubu said in his inaugural speech that funds for the subsidy would be redirected to provide better public infrastructure.
Nigeria currently has four state-run refineries with a total production capacity of 450,000 barrels a day, but the NNPC imports nearly all of the country’s petroleum products because its refineries aren’t functioning.
A new refinery in Lagos, the $18.5 billion Dangote facility, is expected to begin production in July and could meet all of Nigeria’s petroleum product requirements and export the excess, said Aliko Dangote, chairman of the Dangote Group. The refinery has the capacity to produce 650,000 barrels a day.
Efforts by previous governments to abolish the fuel subsidy had been opposed by labor unions, students, market women and people who said cheap petrol was the only benefit they derive from Nigeria being a big crude oil producer and exporter.
Last month, the Buhari administration said Nigeria had secured an $800 million relief package from the World Bank to help cushion the impact of the fuel-subsidy removal. Former Finance Minister Zainab Ahmed said the money would be distributed to 10 million households in cash. She said authorities would also develop a mass transit system to ease the cost of daily commutes.
On the monetary policy of his administration, Tinubu said the Central Bank of Nigeria would work toward a unified exchange rate instead of the multiple exchange rates currently used in the country.
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