Nigeria considers cut in fuel subsidies 

The Nigerian federal government has announced plans to cut its subsidies for petroleum fuels, saying that the price tag has become unaffordable.

According to the federal government, Nigeria spent over US$4.3 billion on petroleum fuel subsidies in 2008.

Despite its significant oil reserves, Nigeria imports much of its petroleum products, before selling them at below market rates.

The government plan, announced in late February, includes deregulating prices and privatizing oil refineries.

The Nigeria Labour Congress, an umbrella group for labour organizations, is resisting, calling the decision “ill-advised”, according to media reports in the country. Efforts to cut fuel subsidies have, in the past, been met by public protests in Nigeria.

President Obama’s budget plans for cut in agricultural subsidies

U.S. President Barack Obama’s proposed 2010 budget includes reform to agricultural subsidies, including a phasing-out over 3 years of direct payments to farmers who make more than US$500 000.

The Obama administration expects that its proposed reforms would save US$16 billion over the next 10 years.

However, as the Reuters news agency reports*, the proposed cuts in agricultural subsidies will have a tough time passing the U.S. Congress.

“We just passed a fiscally responsible Farm Bill that made cuts to farm programs, so now is not the time to reopen it,” said House Agriculture Committee chairman, Collin Peterson, as report by Reuters. 

Speaking to the publication Inside U.S. Trade, University of California professor Dan Sumner said that limiting direct payments based on sales makes little economic sense, as it would still provide these subsidies to retired or weekend farmers. It would be better to scrap direct payments altogether, said Sumner.

*Criticism rains on Obama’s farm subsidy cut idea”, By Charles Abbott, Reuters, 1 March 2009

New project builds database on U.S. federal subsidies

The Pew Charitable Trust has set up a project called Subsidyscope that aims to raise awareness about federal subsidies in the U.S. economy. Over the next several years, the project plans to build searchable databases on federal subsidies, sector by sector.

The project, launched in December 2008, has already pulled together a database on the so-called Transactions under the Troubled Asset Relief Program (TARP).

Under the program, the U.S. government has taken equity stakes in struggling companies. As Subsidyscope explains, an implicit subsidy is provided when companies receive more in federal funding than the market value of the preferred stock and warrants that the government receives in exchange.

Explaining the rationale behind the project, John E. Morton, managing director of Pew’s Economic Policy Department said: “Too often policymakers speak as if subsidies are limited to direct expenditures on assorted social programs. The reality is that, increasingly, they flow through the tax code and are not subject to the same level of public oversight. In our fiscally constrained environment—and with government interventions shifting new burdens onto American taxpayers—there is more need than ever for a comprehensive and transparent fact base to inform future discussions about subsidies.”