So a little while ago, I was asked to put down my thoughts on the FGN's decision to remove the petroleum subsidy in 2012. As far as I know, I don't think it was used anywhere. I guess the thing died. So I decided to give it a look over and post it here for you guys to take a look at. It basically goes from the premise that I'm in charge of implementing the subsidy program.

The Government should begin subsidy removal in 2012. If I were in tasked with removing subsidy, and all the political obstacles were overcome, this is how I’d do it:


1. Deregulate the distribution:
I’d remove the petroleum equalization fund and stop regulating trucking. The nation needs to get used to the fact that pump prices are different across the nation. This should spur the development of trucking and logistics companies that can be profitable

2. Subsidy Peg:
Make the subsidy a fixed peg. Rather than fix the pump price at N65. I’d fix the subsidy at N85/ litre and have it reduce over time. This should limit the shock to the country and allow for proper subsidy budgeting.

3. Pipeline & Depot System:
Use the majority of the funds released from the subsidy reduction to fix the pipeline system. Starting with Atlas Cove and the pipelines and depots in Lagos and then to the nationwide trunk lines.

4. Refineries:
Auction off the refineries. Strict technical criteria. Financial capacity. FG to keep 25% of each refinery company and should sell it on the Nigerian Stock Exchange.

5. Poverty Alleviation:
If we had more of a formal economy, I’d do this by tax rebate for people at certain income levels. However the only way I can think to do this is to provide free primary healthcare to every local government. Staffed, equipped etc. If there are funds left over, primary education in every local govt could be pursued as well.

So what do you guys think. If you had to remove subsidy how would you do it?