Focus on Africa (BBC World Service)

Senior fellow Todd Moss was interviewed for the BBC's World Service Focus on Africa show on Nigerian petrol subsidies.

Focus on Africa Transcript:

(starting at 28:15)

Audrey Brown: Now while many people have been out on strike or demonstrating today the government has been maintaining its stance that the subsidy doesn’t make sense in Nigeria its very expensive and it doesn’t actually benefit the poor. Todd Moss from the US based center For Global Development agrees.

Todd Moss: The big problem with fuel subsidies is that they are actually subsidies targeted at the wealthy and the middle class, they are not pro-poor which is a common misconception.

AB: And what do you mean when you say that? Because poor people say that the price of petrol directly effects what they pay for transport, what they pay for food, etc…

TM: The price of petrol effects everybody in an economy but when you’re spending a massive amount of your national resources, in the case of Nigeria, eight- billion dollars or the equivalent of 25% of the budget just on one item, you would hope that that item would be used quite widely. And while everybody uses fuel and everybody rides in taxis in Nigeria, the vast majority of that benefit goes to wealthy people that own their own vehicles and run generators.

AB: But plenty of our listeners say that cheap petrol is one of the only benefits that they get from government. So whether or not people like you and the government’s argument as well is that it benefits only rich people and middle class people, poor people feel that they do benefit and they feel it’s the least the government can do for them.

TM: It’s very clear that the economic case for subsidies is very very week. Politically this is a problem for the government because of this perception that the government doesn’t do anything else. So that’s something that the government will clearly need to make a case that the savings of eight billion dollars will be used in a way that’s better than this very badly targeted subsidy.

AB: So the politics of it, how do you think that the Nigerian government could have handled it?

TM: Well it’s clearly, it’s a political decision, how you would implement the removal of the subsidy. What the government has opted for is sometimes called shock therapy, you do it quickly, you deal with the political fallout and then you move on. The other option would be to do it slowly over time the problem there is that very often once you get started it’s not big enough to get going and then its derailed over time and you actually wind up worse off than where you were before.

AB: So what is a good way of giving the people of Nigeria the benefit of the fact that they are a fuel producing nation?

TM: Well some countries like India and Iran that have been removing subsidies for fuel and cooking oil have been replacing them with targeted cash transfers to reach poor families. This is something that is very highly targeted and has been well evaluated and is much, much more efficient then fuel subsidies.

AB: But do you actually think that the Nigerian government can spend the subsidy money more wisely?

TM: Clearly they have a very very strong economic team that’s in place now and if this team isn’t able to do that I don’t think any will be able to.

AB: That’s Todd Moss from the Center for Global Development.