Petroleum Minister Timipre Sylva recently announced that the Nigerian government would postpone the removal of oil subsidies on imported fuel. The postponement is credit negative because the costly oil subsidies have historically been a key driver of Nigeria's significant fiscal deficits and accelerated deterioration in its public finances, Moody’s Investors Service says in a recent report. The policy reversal also illustrates the country’s weak institutions and limited capacity to implement challenging reforms. 

The elimination of the oil subsidies has been envisaged for more than a decade by successive Nigerian administrations. This time, to further guarantee its implementation, the reform was put into law as a key provision of the long-awaited Petroleum Industry Bill, which was signed into law in August 2021. The government will therefore have to amend the law to reflect its decision to delay the removal of oil subsidies, and will have to propose a supplementary budget law that provides for the oil subsidies beyond June 2022, Moody's Investors Service said in a report published last week. Please see attached the full report.

The report’s author is Aurelien Mali, a Moody’s Vice President - Senior Credit Officer. Please attribute any material used to Mr Mali and Moody’s.