Nigeria has a toxic relationship with fossil fuels. The country is the world's sixth largest producer of crude oil, but, because it does not refine the stuff, it has to buy 85% of its petrol from abroad.
Every year, the government spends billions on fuel subsidies to keep the price of petrol down – and something like a quarter of the money vanishes into the bank accounts of corrupt officials and oil merchants. When the government tries to get citizens to pay the real price of petrol, they rise up in revolt - as happened in January.
Nigeria could produce plenty of low-carbon energy from sustainable sources – solar, bio-mass, geothermal, hydroelectric. But as long as petrol stays cheap, nobody has an incentive to look elsewhere.
Nigeria's fuel subsidy is an impossible burden on the economy, not to mention the environment. In 2011 it cost 2.6 trillion naira ($6.5bn) – double what the government claimed, and nearly 10 times the figure for 2006.
Getting rid of the subsidy should make sense. But without it, gasoline would cost around $1 a litre, and when more than half the population lives on less than $2 a day, dropping the subsidy has proved politically impossible.
That's what President Goodluck Jonathan found in January when he tried to do just this, saying he wanted to divert the subsidy money to pay for infrastructure and social services. Riots and strikes broke out across the country.
The protests were about more than the end of cheap fuel – people were also angry about corruption and unreliable government. But the fuel subsidy is a major cause of those problems. Fuel licences are a tool by which officials hand out patronage: between 2006 and 2011, the number of licences jumped from five to 140. A committee of Nigeria's house of representatives has just reported that the system is “fraught with endemic corruption and entrenched inefficiency”.
The scale of the fraud they uncovered has shocked even cynical Nigerians. A number of federal and regional bodies receiving subsidy money had no dealings in fuel at all. In one incident in 2009, the government's accountant-general made 128 subsidy payments in 24 hours, each of precisely 999m naira ($6.35m). There were only 36 licensed oil marketers at the time. Over three years, the report estimates that $6.8bn has gone missing.
Reforming the oil subsidy system is going to be hard – officials don't want it, consumers don't want it, and the oil companies aren't too happy about proposed rises in the royalties they pay the government. But it's not impossible. Urged by both environmentalists and financial institutions like the International Monetary Fund, several African countries – notably Ghana and Uganda – are beginning to wean themselves off fuel subsidies.
End black subsidies
Every year, $600bn of government money goes into fuel subsidies across the world. Most of that lands straight in the hands of the oil companies – some of the richest and dirtiest corporate giants in the world. Ending the subsidies could help the world meet half its global carbon reduction target.