Believe it or not, there are endemic oil shortages in Nigeria. Oil shortages in the developing world are nothing new, but Nigeria is the sixth largest oil producing nation in the world. Every day the United States buys more than 800,000 barrels of oil from Nigeria. Yet Nigerian citizens themselves have to scrounge for gasoline on the black market. The reasons behind the shortage are a good example of the sort of mismanagement present in many developing nations.
According to the Christian Science Monitor, Nigeria has earned more than $280 billion from oil sales in the last three decades. But, of course, since the oil fields in Nigeria are owned by the state, those profits went to bureaucrats and politicians who were more interested in benefit ting themselves. In fact it is highly ironic that although Nigeria is a major exporter of oil, its four major gasoline refineries are so dilapidated that Nigeria actually imports gasoline for sale in that country.
The Nigerian government made a bad situation even worse by subsidizing the price of gasoline. In theory, Nigerians should be able to buy gasoline dirt cheap. In practice, of course, the required low selling price of gasoline keeps producers from expanding supply. Since Nigerians can’t actually buy much of this subsidized gasoline, a thriving black market in gasoline has sprung up. Here the supply is more abundant — though the quality of the gasoline is often questionable — and the prices are much higher than the government-set prices.
Current Nigerian president Olusegun Obasanjo wants to end the fuel subsidy and privatize the oil industry, but such reform effort are opposed by trade unions. Thousands of people recently turned out for a protest against the privatization proposals.
But although such privatization might create short term problems and dramatic price increases, it is the only long-term way to efficiently allocate scarce resources such as oil.
Source:
Africa’s oil giant runs on empty. Rena Singer, The Christian Science Monitor, March 7, 2001.
Nigeria fuel crackdown. The BBC, March 14, 2001.
Nigeria fuel showdown. The BBC, March 20, 2001.
Fuel demonstration in Lagos. The BBC, March 21, 2001.
Nigeria fuel protests hit Lagos. The BBC, March 21, 2001.