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Nigeria’s NNPC criticises gasoline subsidy

28 Oct 2011, 11.33 am GMT

Nigeria's NNPC attacks gasoline subsidy

Johannesburg, 28 October (Argus) — Nigerian state-owned oil company NNPC has criticised the government's subsidy of domestic gasoline prices, saying that it only benefits the rich and not the majority of Nigerians.

The government aims to remove subsidies on gasoline but has run into opposition from trade unions, which argue that higher gasoline prices and higher transport costs will hit ordinary Nigerians. But NNPC said wealthier Nigerians use subsidised gasoline in their privately owned vehicles, while most workers use public transport powered mainly by diesel, which is not subsidised.

“Who benefits from subsidised gasoline? The gain of course goes to the few Nigerians that can afford fleet of petrol-powered cars, four wheel drives and sport utility vehicles,” NNPC said.

The subsidy on gasoline and kerosine costs the Nigerian government more than $7.5bn/yr. And subsidies have discouraged private-sector investment in new refining capacity in the country. The central bank has also been critical of the financial cost of the subsidy.

Gasoline retails in Nigeria at 65 naira/litre (41¢/l), compared with a total cost of N137/l, according to the government's Petroleum Products Pricing Regulatory Agency.

Nigeria is heavily dependent on refined product imports, especially gasoline and jet fuel, to meet domestic demand. Poor operational performances at the Port Harcourt, Warri and Kaduna oil refineries have increased the country's dependence on imports. The government has made the removal of the subsidy a key economic policy for next year.

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