Thousands of Nigerians protested against the government’s removal of fuel subsidies, seen as the only benefit many receive from the abundant hydrocarbons produced in the country; however, a solution could be found if the Nigerian government implemented renewable energy subsidies to provide another option for locals.
Economists say that the fuel subsidy promotes corruption and is wasteful, unsustainable, and siphons off billions of dollars of public funds to a cartel of fuel importers. And while that may be true, it is unfathomable that the country could withdraw such a mechanism without offering another viable solution. While subsidies are given to a sector in order to maintain affordability for residents and usually drives economic growth seen in foreign companies venturing into the particular subsidized sector. However, Nigeria saw a 29% decrease in foreign direct investments (FDIs) in 2010 compared to 2009 – which was largely attributed to the uncertainty over Nigeria’s Petroleum Industry Bill (PIB) and political instability.
Protests over the end of the fuel subsidy resulted in violence with police reportedly shooting two protesters and wounding more than 24 on January 9. President Goodluck Jonathan said that despite previous protests and strikes being held over the end of fuel subsidies, he was unwilling to back down this time around.
Like with feed-in tariffs, there must be an appropriate step-down process. Instantly withdrawing a tool that many Nigerians have grown dependent upon will have devastating effects. The end of fuel subsidies is a positive thing, but to avoid the economic pitfall that could occur as a result of strikes and continued protests, another method should be considered. Slowly decreasing the fuel subsidy and providing more incentives for renewable energy applications could help the country’s economic outlook while also freeing up more of its hydrocarbon sector for export.
Alternative Energy