Restoring petrol subsidy

Restoring Nigeria’s petrol subsidy would take the country back to what Seun Awogbenle calls “biblical Egypt.” In his view, former Vice President Atiku Abubakar’s proposal is not only politically opportunistic, but also dangerous for an economy that has already struggled under the cost of fuel support.

When Bola Tinubu took office in May 2023, Awogbenle says Nigeria faced mounting debts, weak revenue and multiple subsidies that had left a large hole in public finances. States struggled to pay salaries, while the government pledged oil that had not yet been produced to creditors in exchange for short-term relief.

The need to end the petrol subsidy was widely accepted by the presidential candidates in 2023, including Atiku, Awogbenle writes. More than three years after Tinubu removed it, he had hoped the issue would focus on managing the consequences rather than reopening the policy itself.

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But look, to bring back fuel subsidy is to take Nigerians back to the biblical Egypt.

Awogbenle sets out three arguments for keeping the subsidy abolished. It had distorted public finances and the wider economy, crowded out investment in other sectors and made resource allocation inefficient. Removing it, he argues, gives the government fiscal room to invest in areas that support growth.

He also rejects the idea that the government simply saved large sums by ending the subsidy. Nigeria had been borrowing to fund it, he says, making the arrangement a net drain rather than a genuine saving. Atiku’s proposed producer-based model would pay local refiners through discounted oil, but much of Nigeria’s oil allocation has already been pledged to creditors under an earlier subsidy arrangement. Awogbenle argues that this could leave too little oil to meet local refiners’ needs.

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How do you save what you never had?