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exchange rates. In this case, the authorities in question share the details of the calculation for the sake of transparency (and there is no subsidy involved).

These changes have been forced upon the FGN by the fiscal hit from the doublewhammy of the global virus and the crashing oil price. The chairman of the Senate committee on petroleum resources said in early June that the annual cost of the subsidy had averaged N511 billion over the past decade. In 2011 alone, the year before the Jonathan administration managed to push up the maximum retail price, the cost was close to N2 trillion. To put the subsidy cost into perspective, the National Assembly last month approved the 2020 budget with total oil and gas revenue of N1.4 trillion, compared with N3.7 trillion in the pre-COVID budget approved (and signed off by the president) in December. The assumed average oil price was slashed from US$57/b to US$25/b over the six-month period.

At this point we cannot quantify the extent of the reform with any precision. We can say, however, that the removal of subsidies brings closer another change, namely the unification of FX rates or at least the scrapping of the preferential/ CBN/official rate. The main application of this rate is for petroleum product imports. In the absence of subsidy, these imports will be shared by the NNPC and private marketers. The rationale for the special rate then becomes much weaker.

The removal of the subsidy also changes the dynamics of the illegal crossborder export trade in petrol. Nigerian tax rates are not the same as those in neighboring Franc Zone states naturally, yet the trade becomes less of a ‘nobrainer’, particularly when product prices are relatively high. Without getting carried away with ourselves, we add in conclusion that the FGN’s straitened fiscal circumstances have forced it to set a date for the end of electricity subsidies and may well have contributed to the current restructuring within the NNPC.