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Oil Subsidy Administration in Nigeria

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Globalization, Democracy and Oil Sector Reform in Nigeria

Part of the book series: African Histories and Modernities ((AHAM))

Abstract

This chapter provides a critical assessment of the subsidy administration, examines the realities and logic of fuel subsidies, revealing the manner in which the prevailing system breeds corruption in the marketing and distribution arm of the oil sector. A proper understanding of subsidy administration reveales mismanagement, unprofessionalism, depth of oil corruption and foundations of public dissent against the pseudo-deregulation and subsidy reform initiated by the government to sanitize the oil sector and ensure effective service delivery. The chapter assesses the performance of Nigeria’s refineries and asserts that capacity under-utilization provides an explaination for the crisis experienced in the sector and activities of the oil-importation network that result in defrauding the state. Using a case study approach, the chapter place the subsidy administration in the context of these developments.

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Notes

  1. 1.

    That was my response to questions on the state of Nigeria’s oil reform during the 2013 edition of U & D Oil and Gas International Conference, International Conference Centre, Abuja, September 26, 2013.

  2. 2.

    Implicit subsidies are much harder to measure and often unreported. They include costs borne by public entities such as oil-producing companies that are not typically reported in the budget; tax expenditures such as tax exemptions for oil products; and the difference between retail prices and import parity prices (Baig et al. 2007, p. 11).

  3. 3.

    Explicit subsidies mainly reflect compensation to the national energy company for the increased difference between the wholesale domestic price and the world price of fuels (Baig et al. 2007, p. 10).

  4. 4.

    See http://www.fmf.gov.ng/component/content/article/3-trendingnews/63-faqfuelsubsidy.html

  5. 5.

    The Governor’s Forum comprised of the 36 Governors representing their respective states. It is not a legally constituted body, but it enjoys strong legitimacy to make recommendations to the central government and react to issues on governance.

  6. 6.

    The Medium Term Expenditure Framework (MTEF) is a statutory document that articulates the federal government’s revenue, spending plan and its fiscal policy objectives between 2012 and 2015.

  7. 7.

    Jide Akintunde is the Managing Editor of Financial Nigeria Publications.

  8. 8.

    This information is available online at http://abarrelfull.wikidot.com/european-refineries

  9. 9.

    Either N561 million or N261 million.

  10. 10.

    The federal government invited the labour union for a dialogue in respect of the need for deregulation . Nigerians were represented by the labour union and civil society groups. The dialogue was held on November 14th, 2011. Despite the unanimous call by these representative groups to postpone deregulation and any increase in fuel prices until an amicable resolution of its modalities, the federal government announced subsidy removal and deregulation on January 1st, 2012. For more information , see NLC (2011).

  11. 11.

    PMS is needed to power automobiles as the primary and most common means which farmers and non-farmers use to transport their goods from their homes to market. Furthermore, PMS is required to power generating sets because there is high irregularity in electricity supply from Power Holding Company of Nigeria.

  12. 12.

    It is revealed that many of the officials saddled with the responsibility of determining sector data are ill-trained, unprofessional, incompetent and naïve in the knowledge of basic statistic. The problem goes beyond oil theft; many civil servants—especially those in the oil sector—are employed through nepotism.

  13. 13.

    This was another case of corruption where the oil marketers collaborated with public officials to rip off the country of excess payment on subsidy claims.

  14. 14.

    This is the deputy head of the Nigerian Custom Service.

  15. 15.

    Professor Assisi Asobie was a former president of the Academic Staff Union of Universities (ASUU), an umbrella association for all academic staff of government owned universities in Nigeria. The Buhari’s administration effected a change of leadership and appointed Mr. Waziri Adio as NEITI chairman.

  16. 16.

    This is available at http://www.pppra-nigeria.org. The 2013 template is also attached as an Appendix.

  17. 17.

    The cost of the PMS subsidy is always higher than the federal government projected amount. In 2011, the appropriation bill approved only N245 billion ($1.5 billion) but the actual amount spent was about N1.348 trillion ($8.4 billion) by the end of 2011 (IISD 2012, p. 10).

  18. 18.

    This is the transportation of products for distances beyond 450 km from the federal government approved loading point.

  19. 19.

    The late Sam Aluko was a Professor of Economics and a prominent economic adviser to the federal government under the military regime of late General Sani Abacha.

  20. 20.

    Forbes lists Mr. Dangote as the richest man in Africa . The Nigerian businessman accrued his wealth from cement, flour and sugar business. He is worth about US$16 billion (£10bn).

  21. 21.

    This is an association of oil producing countries. It was founded in 1960 and presently has 12 members, namely Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador and Gabon. Angola and Indonesia have terminated their membership. The organization regulates the supply and price of crude oil in the international market. With the exception of Nigeria and South Africa, other countries were under authoritarian or totalitarian regimes.

  22. 22.

    See http://online.wsj.com/articles/new-indonesia-leader-looks-to-tackle-fuel-subsidies-1413793138

  23. 23.

    In Jordan, there is universal access to stable electricity. In Nigeria the rural areas, semi-urban areas, as well as remote parts of urban centres, are subjected to erratic electricity.

  24. 24.

    The government did not see the need to reduce subsidy on kerosene ; hence, its price was about two-thirds of the world price. However, the implementation of the transfer program led to significant reduction of the kerosene subsidy (Baig et al. 2007, p. 15).

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Authors and Affiliations

  1. Department of Public Administration, University of Zululand, KwaDlangezwa, Kwazulu-Natal, South Africa

    Adeoye O. Akinola

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  1. Adeoye O. Akinola
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Akinola, A.O. (2018). Oil Subsidy Administration in Nigeria. In: Globalization, Democracy and Oil Sector Reform in Nigeria. African Histories and Modernities. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-70184-4_9

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  • DOI: https://doi.org/10.1007/978-3-319-70184-4_9

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-70183-7

  • Online ISBN: 978-3-319-70184-4

  • eBook Packages: HistoryHistory (R0)

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