Globally, fossil fuel subsidies were $7 trillion or 7.1 percent of GDP in 2022, reflecting a $2 trillion increase since 2020 due to government support from surging energy prices. Subsidies are expected to decline in the near-term as energy price support policies is unwound and international prices fall, but then rise to $8.2 trillion by 2030 as the share of fuel consumption in emerging markets (where price gaps are generally larger) continues to climb. 18 percent of the 2022 subsidy reflects undercharging for supply costs (explicit subsidies) and 82 percent for undercharging for environmental costs and forgone consumption taxes (implicit subsidies), with the share of explicit falling to 8 percent by 2030.
Subsidies are intended to protect consumers by keeping prices low, but they come at a substantial cost. Subsidies have sizable fiscal consequences (leading to higher taxes/borrowing or lower spending), promote inefficient allocation of an economy’s resources (hindering growth), encourage pollution (contributing to climate change and premature deaths from local air pollution), and are not well targeted at the poor (mostly benefiting higher income households). Removing subsidies and using the revenue gain for better targeted social spending, reductions in inefficient taxes, and productive investments can promote sustainable and equitable outcomes. Fossil fuel subsidy removal would also reduce energy security concerns related to volatile fossil fuel supplies.
What Lagos has gained in tranquillity it has lost economically since President Bola Tinubu abruptly ended the supply of cheap fuel in his first day in office at the end of May. Oil-rich Nigeria, he said, could no longer afford to subsidise petrol which was costing billions of dollars a year.
Mr Tinubu also ended currency restrictions that had been put in place by the previous government, and while many experts agree that it was the right thing to do, it has led to a weakening of the local currency.
The double whammy of rising fuel costs and a weak currency has sent the economy into a tailspin, and nowhere is the biting hardship more apparent than in Lagos - a commercial behemoth that is often a snapshot of the rest of the country.
Africa is now becoming enormously important and news services still underreport on it as if it were only an impoverished backwater emerging from colonialism.
Ending the subsidies was urgent, but as un-carefully-planned as was the initial voter bribing initiation of same.