Abstract
This paper traces the origins of the Petroleum Equalization Fund (PEF) in Nigeria and describes the environment in which it has operated. The paper argues that the PEF has failed to live up to its mandate of equalizing the prices of petroleum products across the country. This is in part because such equalization schemes create arbitrage opportunities which are always prone to exploitation. The rentier nature of the Nigerian state and the prevalence of corruption in the country have added fodder to such exploitations. The consequence of the above is that PEF has simply become one of the inefficient channels of subsidizing the price of petroleum products in Nigeria. This paper therefore recommends that the starting point in the efforts by the Nigerian government to undertake petrol subsidy reform in the country should be to abolish the PEF.
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