NIGERIA’S previous attempt to reduce the vast sums it squanders on fuel subsidies did not go well: protesters poured onto the streets after the price of fuel doubled in 2012. Shops, schools and petrol stations shut and the government was forced into an embarrassing U-turn. Now a new administration led by Muhammadu Buhari, a former military ruler, is taking another shot at reform. Last week the official price of petrol was jacked up 67%, to 145 naira per litre ($0.43 at black-market rates). Restrictions on who can import the stuff were also lifted. The new petrol price is still well below a true market price, but it is a start. Price controls fuel a huge racket: importers are paid the difference between the market rate and the Nigerian one. The government argues that the subsidy helps the poor. In fact the scheme is a cash machine that spews public money into the hands of fuel importers, employees of the state-owned oil company and government officials who collude to pocket cash paid to subsidise fictitious imports. In 2011 (the peak year), some $14 billion in hard currency was squandered on petrol subsidies. Truckloads of Nigerian petrol are smuggled abroad and sold at market prices, leaving Nigerian pumps dry.

Since 2014 the government’s finances have been thrown into disarray, thanks to a collapse in the price of oil, which accounted for 90% of federal revenues, and disruptions to production by militants who blow up pipes and kidnap oil workers. The fiscal deficit almost doubled to 4% of GDP in 2015 and economic growth slumped to 2.7%, the slowest since 1995.

Because oil is cheap, the subsidy payments have fallen too, easing pressure for reform. But there are still good reasons to end subsidies and free prices completely. That should end petrol shortages at a stroke. It would also give investors an incentive to build oil refineries in Nigeria, which would be lunacy now.

Another pressing reason to deregulate is that Nigeria faces a chronic shortage of dollars. Since oil prices slumped, the trade deficit has ballooned. An open economy would adjust to such a shock by allowing its currency to devalue, making imports costlier and locally produced goods more attractive (although higher inflation would be a nasty side-effect). Instead Nigeria has insisted on defending its currency, the naira, keeping the official exchange rate pegged at 197 to the dollar. (On the black market it trades for 340.)

The country needs about $18m-worth of fuel imports each day (and tens of millions of dollars more to feed and clothe its people and buy spare parts for factories). Reserves have fallen to $27 billion—the equivalent of about seven months’ supply. The central bank cannot provide enough dollars at the official rate to pay for all these imports and it releases only about $200m a week. This has opened new avenues for graft: people with access to cheap dollars can nearly double their money in minutes by selling them on the black market.

Businesses without connections typically have to buy dollars there. That has translated into higher prices for almost everything, including petrol, which was supposed to sell at an official rate of 87 naira per litre for the past year but in fact sold last month at an average of almost 163 naira (see chart).

The only way to match the supply of and demand for fuel and dollars is to let the market determine the price of both. Some analysts think that the government’s raising of fuel prices is a prelude to letting the currency slide. The central bank denies it.

One lonely union has organised a strike against pricey petrol, but it lacks support. Protesters were reportedly stoned in Jos, a city in the centre of the country, when they encouraged traders to close their shops. A reversal seems unlikely. “I protested in 2012 but I wouldn’t do it again,” one civil servant says as his car snakes through a queue in the capital. “Nigerians have been ripped off. Something had to change.”