Impact Of Fuel Subsidy On Economic Growth In Nigeria Impact Of Fuel Subsidy On Economic Growth In Nigeria

Abstract

The focus of this paper is to critically look at the impact of fuel subsidy on economic growth in Nigeria. Subsidies that are paid for PMS in Nigeria can be utilized to address some social economic problems of the country e.g. electricity, water supply, quality education, roads construction, building, housing estate, unemployment, health qualitative and quantitative health facilities as well as reduction in the level of poverty and reduction of insecurity in Nigeria. Most of the fundamental causes of fuel subsidy in the country including the following: present refineries are not adequately enough to meet the local demand for fuel. The local production of fuel is not sufficient for local consumption, excessive government intervention in the business of oil, problem of crude oil theft in Nigeria, frequent crude oil pipe lines banalization, lack of modular refinery, and lack of private interest in the business of oil in Nigeria. Series of boardroom politics in the management of oil business in Nigeria. High level of corruption in the NNPC, turnaround maintenance that did not improve the level of production of oil, diversion of fuel into the neighbouring West Africa Countries, Oil subsidy claims that did not translate to high level of fuel importation into the country, fluctuation in the world market price, OPEC decision that may not favor crude oil production is another factor, Using of wrong template to determine the price of PMS is also another serious factor. In view of these aforementioned problems, suggestions are thereby recommended. All the refineries should be privatized, total deregulation of downstream sector of oil and gas should be put in place, more refineries should be built, alternative sources to PMS should be introduced, licenses should be given to expertise who are ready to build refineries in Nigeria, NNPC account should be audited on daily basis, oil subsidy for genuine oil marketers, outstanding balances for oil marketers should be considered for payment with immediate effect. Modular refineries should be built across the country, crude oil smugglers should be arrested and jailed for economic sabotage, modern and computerized refineries should be introduced into Nigeria, and fraudulent oil subsidy claims should be arrested and prosecuted.