As the Federal Government struggle to cut down on its expensive petrol subsidy, Sub-Saharan African (SSA) countries are increasingly dumping the unpopular policy, to save funds for more productive expenditure, particularly infrastructure, according to a recent report by Renaissance Capital, (RenCap) a leading investment bank focused on the emerging markets of Russia, Ukraine, Kazakhstan and sub-Saharan Africa.

The report highlighted why countries like Ghana, Tanzania and Uganda tackled the expensive policy head on, and noted that it was prone to corruption. It further observed the regions infrastructure frustrations had made jettisoning subsidy a prerogative, despite the implication for inflation. It added that the position was more compelling for price libralisation, viewed largely as a major influence on foreign investment onflow.

“In recent weeks, we have observed the cutting of subsidies in a few Sub-Saharan African (SSA) countries,” Rencap said.  “SSA governments appear to be moving to rid themselves of expensive subsidies which divert funds from other productive expenditure (particularly infrastructure), and put downward pressure on budget deficits, implying higher borrowing costs.”

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