Atiku’s subsidy plan will recreate Nigeria’s fiscal burden, says A..

A UK-based business executive, Kayode Adebiyi, has warned that former Vice President Atiku Abubakar’s proposal to restore petrol subsidy could recreate the fiscal pressures that contributed to Nigeria’s economic difficulties before the policy was removed.

Adebiyi, in a commentary on the renewed debate over petrol subsidy, argued that Atiku’s proposal could offer short-term relief to consumers while transferring the cost to government finances, taxpayers and future generations.

He said the central issue in the subsidy debate should not be where the money saved from subsidy removal is located, but the fiscal obligation that government no longer has to finance following the end of the subsidy regime.

According to him, the former subsidy system did not involve a large pool of cash sitting in a government account that became available after the policy was terminated.

Rather, he explained that the government had been bearing the difference between the economic cost of supplying petrol and the artificially low price at which the product was sold, with the burden at various times being absorbed by the Nigerian National Petroleum Company Limited (NNPCL) and ultimately reflected in reduced revenues available for distribution through the Federation Account.

Adebiyi cited World Bank and International Monetary Fund assessments to argue that the subsidy had become a significant fiscal burden before its removal.

He noted that the World Bank estimated that petrol subsidy in 2022 consumed about 32.4 per cent of total government revenues and amounted to approximately 2.2 per cent of gross domestic product.

He also pointed to subsidy arrears accumulated by NNPCL, arguing that the existence of such liabilities meant that the immediate fiscal benefits of subsidy removal could not simply translate into equivalent cash available to the government.

“The important economic gain from subsidy removal is therefore not necessarily a pile of cash that government can point to,” Adebiyi argued, adding that the major benefit was the elimination of a recurring fiscal obligation.

He said the distinction was important in understanding why Federation Account revenues did not immediately surge following the removal of subsidy, noting that inherited obligations and arrears had to be dealt with before the full fiscal benefits could become apparent.

Adebiyi also rejected the argument that restructuring subsidy would fundamentally change its economic consequences.

He said Atiku’s proposal to link subsidy to domestically produced crude, provide preferential crude supplies to qualifying Nigerian refineries and impose an annual spending limit would not eliminate the underlying cost if petrol continued to be sold below its economic cost.

“If government gives a refinery crude below its economic value so that petrol can be sold below its market-reflective cost, somebody bears the difference,” he said.

According to him, whether the cost is borne directly by government, absorbed by NNPCL, financed through borrowing or accumulated as arrears, the economic burden ultimately remains.

He therefore argued that changing the mechanism through which subsidy is administered would not eliminate the subsidy itself.

Adebiyi further challenged the argument that subsidies are common in developed economies, saying the relevant question for Nigeria should be whether a particular subsidy is affordable, transparent, targeted and capable of producing meaningful economic benefits.

He maintained that Nigeria’s former petrol subsidy regime failed on those criteria, particularly because the benefits were not sufficiently targeted at poorer Nigerians.

Instead of restoring petrol subsidy, Adebiyi urged policymakers to focus on targeted interventions that cushion vulnerable households while preserving the fiscal gains from subsidy reform.

He acknowledged that the removal of subsidy had imposed significant hardship on Nigerians through higher petrol prices, transport costs, food prices and household energy expenses.

However, he argued that the hardship should strengthen the case for better social protection rather than provide justification for reversing the reform.

He challenged the Federal Government to demonstrate how the fiscal space created by subsidy removal had been deployed, including how much had been used to clear inherited obligations, fund social protection and improve infrastructure and public services.

According to him, Nigerians have a legitimate right to demand greater transparency over the use of the resources freed by the reform.

He, however, cautioned against returning to what he described as the politics of artificially cheap petrol.

Adebiyi also questioned Atiku’s change of position on subsidy, noting that the former vice president had campaigned in the 2023 presidential election on a pledge to remove petrol subsidy.

He said Atiku should explain what had changed in his economic assessment to warrant his current proposal to restore the policy.

Nigeria, he argued, continues to face competing demands for scarce public resources, including debt obligations, infrastructure deficits, social protection and other developmental needs.

The executive maintained that the central economic question should therefore be how Nigeria can reduce the burden of high energy costs on households and businesses without recreating an unsustainable fiscal obligation.

He said the debate should move beyond promises of cheaper petrol to policies capable of improving household incomes, productivity and the broader economy.

“A petrol subsidy can make fuel cheaper today while making government poorer tomorrow,” Adebiyi argued.

He maintained that the long-term objective should be to build an economy in which Nigerians can afford petrol and other essential goods without government having to borrow or sacrifice critical public expenditure to artificially suppress prices.

Adebiyi’s intervention comes amid renewed political debate over the future of petrol pricing and the economic consequences of the Federal Government’s decision to end the longstanding subsidy.