Paper short abstract:

Why Nigeria is dependent on heavily subsidized imported petrol? This paper argues that Nigeria is trapped in a system where subsidized imported fuel replaces electricity infrastructure for Nigerians to sustain their daily lives due to the degraded infrastructure and heavy external dependence.

Paper long abstract:

Why Nigeria, as a major crude oil-producing country in the world, is dependent on imported fuel for its domestic consumption and the government is heavily subsidizing it? This paper argues that Nigeria is now trapped in a system where subsidized imported fuel replaces electricity infrastructure as a quasi-public good for Nigerians to sustain their daily lives due to the declining infrastructure and heavy external dependence. This system is constructed by an unplanned combination of domestic electricity demand, international finance capital hegemony, and domestic political and commercial capital alliances. The system is further strengthened and reproduced by the increasing dependence on domestic fuel consumption for electricity, which reinforces the lack of government incentives to promote infrastructure reforms, and compels the government to spend more petrodollars on fuel imports and subsidies. However, this system is inherently unstable and unsustainable. The instability of the system lies in the fact that the government is exposed to both international fuel market prices and exchange rate fluctuations providing subsidized imported fuel, which makes the cost of imports and subsidies unpredictable. As for the unsustainability of the system, Nigeria’s heavy dependence on imported goods, including fuel, has led to continued capital outflows, making it more and more difficult and expensive for the government to afford large amounts of budget for fuel imports and subsidies.