Nigeria lifts gas subsidy, nearly doubling the price of fuel

Lagos: Nigeria's government announced today it is lifting a controversial subsidy on gas, nearly doubling the price amid a massive fuel shortage and militant attacks on oil installations in Africa's biggest petroleum producer.

Previous attempts to end the subsidy have provoked riots and, in 2012, the biggest demonstrations ever seen, forcing the government to retract. Rampant corruption fueling shortages of everything from power to running water had many Nigerians feeling cheap fuel was one of their few advantages.

It was unclear how Nigerians would react to today's decision by the year-old government of President Muhammadu Buhari, announced after a meeting that included labor leaders.

Petroleum Minister Ibe Kachikwu announced the new gas price of a maximum of 145 naira (73 U.S. Cents) a liter, up from 86.5 naira (43 cents). He noted that the months-long scarcity has meant Nigerians already are paying up to 250 naira (USD 1.26) a liter on the black market.

Kachikwu said importers have had difficulty sourcing foreign currency because of a huge decline in foreign exchange earnings caused by low oil prices.

Nigeria refines only enough crude to provide half its needs.

He said the government is liberalizing the market, to increase and stabilize supply, allowing any Nigerian entity to import fuel using foreign currency from any source. That would include foreign exchange bureaus where the naira recently has traded at up to double the official rate of about 199 naira to the dollar.

He hoped the competition would eventually drive prices down.

The meeting was led by Vice President Yemi Osinbajo, who has said that the fuel subsidy costs the government USD 5 billion a year.

Eighty percent of Nigeria's foreign currency comes from the petroleum industry, hit by renewed militant attacks this year that have cut production from 2.2 million barrels of crude a day to about 1.68 million.