ABSTRACT
Fuel subsidy as a policy is used by government to achieve certain objectives, one of which is to ensure energy access. However, these subsidies have been found to exert fiscal pressure on budgetary balance, to be wasteful and also inefficient. These negative consequences of fuel subsidy have led to calls by International Organisations such as the Organisation for Economic Co-operation and Development (OECD), United Nations, G-20 among others, for their reform based on the threat they pose to sustainable development. Despite these negative influences that had been identified, many countries continue to subsidise fossil fuel. In Nigeria, the removal of subsidy on Premium Motor Spirit (PMS) had been a controversial and sensitive issue. Using the political-economy approach, backed by empirical analysis, the paper investigates the political and economic barriers to adequate reform of fuel subsidies in Nigeria. The paper finds that lack of trust in government often results in stiff resistance by the citizens against subsidy reforms as fuel subsidies are now used to lobby for political votes. The study suggests among others the need to examine some of the lessons that can be learnt from countries where the reform had been successful.
