A CITIZENS’ GUIDE TO ENERGY SUBSIDIES IN NIGERIA

The document examines Nigeria's energy subsidy regime, focusing on Premium Motor Spirit (PMS), household kerosene (hhK), and electricity. It highlights the immense fiscal burden on the government, with fuel subsidies alone estimated at over ₦2 trillion in 2011. The guide argues that these universal subsidies disproportionately benefit higher-income earners and are plagued by systemic corruption, such as inflated import claims and the diversion of kerosene to black markets. It also notes that under-pricing of energy has stifled investment in refining and power infrastructure, leading to high reliance on private generators and significant gas flaring. The document outlines the government's transition toward cost-reflective electricity tariffs via the Multi-Year Tariff Order (MYTO) and the attempted removal of gasoline subsidies through the SURE-P program, while providing international lessons on gradual price liberalization and targeted social compensation.

• Nigeria's gasoline (PMS) subsidy is calculated as the difference between the Expected Open Market Price (EOMP) and the government-approved retail price. In April 2012, the EOMP was ₦169.13 per litre while the retail price was ₦97.00, resulting in a subsidy of ₦72.13 per litre.
• Fuel subsidies impose a severe fiscal strain on the Nigerian government; in 2011, the Central Bank of Nigeria estimated losses related to fuel subsidies at over ₦2 trillion (US$12.4 billion), representing more than 39% of total government expenditure for that year.
• The household kerosene (hhK) subsidy is largely ineffective because the regulated price of ₦50 per litre is rarely passed to consumers, with actual retail costs ranging from ₦100 to ₦250 per litre due to the product being diverted to depot owners and middle-men.
• Systemic corruption has led to massive abuse of subsidy funds. A House of Representatives probe found that the actual subsidy payment figure as of December 31, 2011, was ₦2.5 trillion (US$15.5 billion), far exceeding the ₦245 billion budgeted for gasoline.
• Electricity subsidies are administered through the Power Consumer Assistance Fund (PcAf) and the Multi-Year Tariff Order (MYTO), which aims for cost-reflective tariffs while providing 'lifeline' rates for low-income consumers (those using 50 kWh or less).
• Energy subsidies have negatively impacted the energy sector by discouraging investment in refining and power infrastructure. The under-pricing of natural gas for electricity has specifically incentivized gas flaring, making Nigeria the second largest flarer of gas globally as of 2012.
• The government's attempt to remove gasoline subsidies on January 3, 2012, led to national protests, resulting in a partial reinstatement of the subsidy and the creation of the Subsidy Reinvestment and Empowerment Programme (SURE-P) to mitigate social impacts.

APA

International Institute for Sustainable Development (2012). A CITIZENS’ GUIDE TO ENERGY SUBSIDIES IN NIGERIA. https://www.iisd.org/gsi/sites/default/files/ffs_nigeria_czguide.pdf

Chicago

International Institute for Sustainable Development. A CITIZENS’ GUIDE TO ENERGY SUBSIDIES IN NIGERIA. 2012. https://www.iisd.org/gsi/sites/default/files/ffs_nigeria_czguide.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=A CITIZENS’ GUIDE TO ENERGY SUBSIDIES IN NIGERIA |date=September 2012 |url=https://www.iisd.org/gsi/sites/default/files/ffs_nigeria_czguide.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2012citizens, author = {{International Institute for Sustainable Development}}, title = {{A CITIZENS’ GUIDE TO ENERGY SUBSIDIES IN NIGERIA}}, institution = {International Institute for Sustainable Development}, year = {2012}, month = sep, url = {https://www.iisd.org/gsi/sites/default/files/ffs_nigeria_czguide.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }