The proposal by former Vice President Atiku Abubakar to restore petrol subsidies has drawn a strong response from the Presidency, which argues that returning to the old subsidy regime would undermine ongoing reforms in Nigeria’s petroleum sector and place renewed pressure on public finances.
In a statement issued by the Special Adviser to the President on Information and Strategy, Bayo Onanuga, the Presidency described Atiku’s proposal as a reversal of his previous position on fuel subsidies and questioned its fiscal and legal implications.
The statement recalled that the Petroleum Industry Act (PIA) provided for the end of the petrol subsidy regime by June 2023, with President Bola Tinubu subsequently accelerating its removal. The Presidency argued that restoring the former arrangement would require more than simply announcing a lower pump price, as government would have to identify a sustainable funding mechanism and establish how the policy would operate within the current petroleum-sector framework.
Presidency Questions Cost of Proposed Subsidy
According to the Presidency, petrol subsidy does not represent a fixed pool of money available in government coffers for distribution to consumers. Rather, it arises when government or the national oil company absorbs the difference between the regulated pump price and the actual cost of supplying petrol.
The statement questioned claims that subsidy removal had created a ₦30 trillion windfall or savings, arguing that the fiscal implications of the former system included outstanding obligations and other costs incurred by the public sector.
The Presidency maintained that any decision to sell petrol below its economic cost would ultimately have to be financed through public resources. It therefore challenged Atiku to explain the proposed pump price, the annual cost of the subsidy and the revenue source that would fund it.
Changing Petroleum Landscape
A central argument advanced by the Presidency is that Nigeria’s petroleum industry has changed substantially since the subsidy regime was dismantled.
For years, Nigeria depended heavily on imported petrol, with government absorbing much of the difference between the regulated retail price and the cost of importing and distributing the product. The emergence of significant domestic refining capacity, particularly the Dangote Refinery, has changed the structure of the market.
The Presidency argued that the growth of domestic refining creates opportunities for Nigeria to conserve foreign exchange, strengthen energy security, develop local industry and generate employment.
It further contended that reinstating the former subsidy system could undermine investment in smaller domestic refineries and weaken incentives for local production.
Fiscal Gains and Revenue Distribution
The Presidency also linked the removal of petrol subsidies to improved government revenues, arguing that funds previously committed to subsidising petrol are now available for distribution among the federal, state and local governments.
It cited the approximately ₦3 trillion shared by the three tiers of government from the Federation Account in July as evidence of the improved fiscal position.
The statement argued that returning to the previous system could once again expose government finances to large and unpredictable liabilities, potentially reducing resources available for infrastructure, social services and development programmes.
Government Promotes Alternative Relief Measures
While defending subsidy removal, the Presidency acknowledged the pressure that higher petrol prices have placed on households and businesses.
It pointed to the government’s promotion of Compressed Natural Gas (CNG) as an alternative, noting that CNG can be significantly cheaper than petrol for transportation. The statement urged commercial transport operators to pass the resulting savings on to consumers.
The Presidency said sustainable relief should focus on reducing the underlying cost of transportation and energy rather than recreating a subsidy arrangement that could become a long-term burden on public finances.
Presidency Challenges Atiku to Provide Details
The statement concluded by calling on Atiku and other political actors to provide Nigerians with detailed fiscal and legal explanations for any proposal to restore petrol subsidies.
Among the questions raised are how much the proposed programme would cost annually, whether it would be financed through borrowing or existing revenues, whether amendments to the Petroleum Industry Act would be required, and how subsidy payments would be monitored to prevent the abuses associated with the former regime.
The Presidency also questioned what exactly would be subsidised under the proposed arrangement now that Nigeria has substantially increased its domestic petrol production.
It argued that Nigeria’s debate over petrol prices should reflect the realities of the country’s current petroleum industry rather than return to an earlier era characterised by heavy reliance on imported refined products and significant government intervention.
The statement urged Nigerians to assess political promises against their long-term fiscal implications, stressing that any proposal to restore fuel subsidies should be accompanied by clear answers on its cost, funding mechanism, legal basis and potential impact on domestic refining.