Oil Subsidy Crises in Nigeria : Lessons from Developing Countries

Many developing countries continue to experience stunted economic growth, partly traceable to the amount of money expended to subsidize energy consumption. Recently, there is a deepening discourse on the need for a policy shift towards the removal of oil subsidies in developing countries, particularly in Nigeria. This would ensure fiscal discipline and enable funds allocation to other cogent economic sectors. However, there is compelling evidence showing that subsidy removal engenders socio-political and economic contradictions in developing countries. Drawing lessons from other countries, the paper critically assesses fuel subsidy reform in Nigeria, examines its impact and evaluates the mechanisms employed to alleviate its negative effect on the poor. Although, there is a global trend towards oil subsidy removal, attempt at deregulation of the downstream oil sector has negatively impacted on the political economy of Nigeria. Instead of driving the developmental agenda of the state, the subsidy reform has deepened massive impoverishment, created socio-economic instability and political dissent.