Page 11 - AfrOil Week 16 2020

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Nigeria announces end to fuel subsidies
NIGERIA
NIGERIA is ending decades of fuel subsidies in order to ensure more stable supply and cut costs for the state, Nigerian National Petroleum Corp. (NNPC) announced last week.
Nigeria relies on fuel imports to meet its domestic needs, as its own four ageing refineries are barely operable. However, it has maintained subsidies to keep domestic fuel prices low for years, draining billions of dollars from public coffers. More than NGN780bn ($2bn) was spent on these subsidies last year alone.
As recently as late March, Nigerian President Muhammadu Buhari’s government refused to remove caps on fuel prices, instead cutting them twice over the past month.
The move to end them comes as Nigeria, Africa’s biggest oil producer, grapples to keep a handle on its finances following a catastrophic collapse in oil prices over the past month. The government has already slashed its 2020 budget by $5bn and is preparing to make further cutbacks.
“What we are putting in place today is a sit- uation where market forces will take control of prices and eliminate subsidies,” NNPC’s man- aging director Mele Kyari said in a video shared
on his Twitter page. “There is no subsidy ... It is zero forever.”
Savings from the measure will be reinvested in infrastructure, healthcare and education, he said.
Nigeria will maintain some control of prices but is drafting a new system that will take mar- ket rates more into account. Because domestic prices are kept artificially low, NNPC imports virtually all of Nigeria’s gasoline, as private com- panies are unable to make a profit doing so.
The new pricing system is aimed at provid- ing private firms a sufficient incentive to import fuel. However, some doubt that this system truly signals an end to subsidies.
“Nigeria needs to let go of this obsession with control, price control,” SBM Intelligence told Reuters last month. “Inevitably oil prices are going to go up. What do we do at that time? We start paying subsidies again.”
Nigeria recently also announced it would shut down its creaking oil refineries while it searches for financing to upgrade them. Once they are modernised, NNPC intends to trans- fer operational control of the facilities to private hands, easing another burden on the state.™
Sudan begins allowing private firms to import fuel
SUDAN
SUDAN’S transitional cabinet announced on April 16 that the private sector and banks would be allowed to import fuel for the transportation, mining and industry sectors for the first time.
The country is struggling with severe fuel shortages, and it is running out of foreign currency reserves needed to pay for imports. Shortages have been particularly acute this year, reportedly because of a blockage in the pipeline that pumps crude oil from fields in Kordofan State to the Khartoum oil refinery.
Having to buy all its fuel itself has placed a considerable burden on the crisis-struck North African state’s budget. Sudan’s govern- ment is struggling to turn the country’s econ- omy around after decades of mismanagement under the rule of ex-president Omar al-Bashir, who was ousted by the military last year. It is also still reeling from the loss of most of its oil wealth after South Sudan’s 2011 secession. The coronavirus (COVID-19) pandemic has wors- ened matters. Sudan also maintains costly fuel
subsidies to keep domestic prices affordable. The IMF and other lenders have repeatedly called on the government to end these subsidies. But it is reluctant to adopt austerity measures too hastily for fear of putting too great a burden on
the population and causing a public backlash. 
Sudan has been struggling with fuel shortages this year (Photo: Dabanga)
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