Nigeria to scrap fuel subsidies

Nigeria's government has announced plans to end fuel subsidies, weaken the ? and increase spending by 7 per cent in next year's budget as oil prices decline. The Budget Office estimates that scraping the subsidy, over the next three years, will save the government $7.5 billion in 2012.

Nigeria is facing tumbling revenues as the price of oil, which constitutes more than 95 per cent of export income and 80 per cent of government earnings, declined by 28 per cent in the past six months. The ? declined to a record low of 160.65 against the $ on Wednesday 5th October; while foreign currency reserves, used to fund the central bank's twice-weekly auctions to stabilize the ?, have fallen 9 per cent in the year through 30th September.

The Budget Office said that the government plans to increase spending to ?4.8 trillion next year and will calculate its revenue using crude oil price of $75 a barrel and output of 2.48 million b/d.

It is estimated that combined spending will rise to ?5.18 trillion in 2015. By that time, the government is also proposing to impose a ceiling on recurrent expenditure, such as wages, in favor of capital investments.

The budget is forecast on an exchange rate of ?153 per $, compared with ?150 at present. The deficit is predicted to narrow to 2.69 per cent of the gross domestic product, from the current 3.62 per cent.

For more news and expert analysis about Nigeria, please see Nigeria Focus and Nigeria Politics & Security.