Restoring petrol subsidy: Atiku’s proposal raises fiscal, legal, economic questions

Stanley Ihedigbo

Presidency has criticised former Vice President Atiku Abubakar’s proposal to restore petrol subsidy, describing the position as a reversal of his earlier stance and a policy that could impose fresh pressure on Nigeria’s finances.

In a statement issued on Thursday by the Special Adviser to the President on Information and Strategy, Bayo Onanuga, the Presidency argued that the proposal should be subjected to serious scrutiny, particularly in view of the significant changes that have taken place in Nigeria’s petroleum industry since the removal of the petrol subsidy.

The Presidency maintained that while Atiku, as a political actor, has the constitutional right to propose alternative economic policies, Nigerians are equally entitled to know how such a proposal would be funded, implemented and reconciled with existing petroleum-sector reforms.

According to Onanuga, Atiku’s current position represents a departure from his earlier advocacy for the removal of petrol subsidy.

He said the former vice president had now embraced the same subsidy arrangement he previously argued should be discontinued, suggesting that the change was politically motivated by the approaching election.

“Desperate for power, he needed to make a promise that he knew, if he were candid with our people, does not make fiscal sense, is retrogressive, and is against the genuine interest of the people,” the statement said.

The Presidency also challenged what it described as misconceptions surrounding the former subsidy regime, arguing that subsidy was not simply money sitting in government coffers waiting to be distributed to Nigerians.

It explained that the arrangement involved the government absorbing the difference between the regulated pump price of petrol and the actual cost of supplying the product, thereby creating substantial financial obligations for the government and the national oil company.

The statement further rejected claims of a ₦30 trillion subsidy windfall or savings, describing such a figure as unsupported.

PIA and subsidy removal

According to the Presidency, the removal of petrol subsidy was not merely a policy decision introduced by the current administration but was already embedded in the broader reforms of Nigeria’s petroleum industry.

It pointed to the Petroleum Industry Act, which established a new framework for the downstream petroleum sector and provided for the discontinuation of the subsidy regime.

The Presidency said President Bola Ahmed Tinubu merely accelerated the implementation of a process that was already expected to take place.

“President Tinubu only accelerated it by weeks to stop further bleeding before the due date,” the statement said.

It therefore argued that restoring subsidy would require more than a presidential announcement, insisting that any such move would have to address the legal, fiscal and administrative implications of returning to government-funded price support.

Nigeria’s petroleum sector has changed
The Presidency also drew attention to the transformation of Nigeria’s petroleum industry since 2023, particularly the emergence of significant domestic refining capacity.

For decades, Nigeria depended heavily on imported petrol, leaving government finances exposed to fluctuations in international oil prices, foreign exchange rates and the cost of importing refined petroleum products.

However, the Presidency said the emergence of domestic refining capacity, particularly the Dangote Refinery, had altered the structure of the market.

It argued that Nigeria was increasingly moving from dependence on imported refined petroleum products towards domestic refining, a development it said could strengthen energy security, conserve foreign exchange and support industrial development.

The statement claimed that the return of a subsidy regime could undermine investments by smaller domestic refineries and distort the emerging market structure.

It specifically argued that subsidy could threaten the viability of local refining operations by recreating price distortions that favour subsidised consumption rather than competitive domestic production.

‘Who pays for the subsidy?’

A major question raised by the Presidency was how any renewed petrol subsidy would be financed.
Onanuga asked Nigerians to demand specific answers on the proposed pump price, the annual cost of the programme and the source of funding.

“If petrol is sold below its economic cost, which is about N1,200 to N1,300, someone must absorb the difference,” the statement said.

According to the Presidency, the cost would ultimately have to be borne by the government through reduced funding for infrastructure and social services, lower allocations to states and local governments, increased borrowing, higher public debt or a combination of these measures.

The Presidency argued that the experience of the past showed that subsidies could become a significant drain on public finances.

It maintained that the government had previously financed or accommodated subsidy obligations through borrowing and other public-sector financing arrangements, while the national oil company accumulated substantial obligations to suppliers.

FG highlights increased government revenue

The statement also linked the removal of petrol subsidy to improved government revenues and higher allocations to the three tiers of government.

According to the Presidency, funds that would previously have been used to finance petrol price discounts were now available for distribution through the Federation Account.

It cited the approximately ₦3 trillion shared by the federal, state and local governments in July as evidence of increased fiscal capacity.

The Presidency argued that the higher revenues were creating greater room for states to pay salaries, undertake infrastructure projects and meet other financial obligations.

It said the development represented a major shift from the previous system, which it argued had diverted substantial public resources towards subsidising petroleum consumption.

The government promotes CNG as an alternative

While acknowledging the hardship caused by high petrol prices, the Presidency said the government was pursuing alternative measures designed to reduce the cost of transportation and energy.

It highlighted the administration’s Compressed Natural Gas initiative, describing CNG as significantly cheaper than petrol for several categories of vehicles.

According to the statement, CNG is about 70 per cent cheaper than petrol and can provide relief for taxis, commercial vehicles and distribution trucks.

The Presidency noted that major Nigerian companies, including Dangote and BUA, have incorporated CNG-powered trucks into their fleets.

It nevertheless urged commercial transport operators to pass the savings generated from cheaper energy sources on to consumers.

Presidency calls for policy debate based on current realities

The Presidency stressed that it recognised the economic hardship Nigerians were facing, particularly the impact of fuel and transportation costs on households and businesses.

It said the debate should therefore focus on sustainable ways of reducing the cost of living rather than recreating what it described as an opaque and financially burdensome subsidy regime.

“The better question is how Nigeria can use its emerging domestic refining capacity, improved petroleum-sector regulation, and increased competition to achieve more stable and affordable energy prices without returning to an opaque and fiscally burdensome subsidy regime,” the statement said.

It challenged Atiku to provide detailed fiscal and legal explanations for his proposal if he intends to make subsidy restoration a major component of his campaign.

The Presidency asked how much the programme would cost annually, what revenue source would finance it and whether the government would need to borrow to sustain it.

It also questioned whether the National Assembly would have to amend existing provisions of the Petroleum Industry Act and other petroleum-sector regulations.
‘Political promises must be backed by arithmetic’

The Presidency concluded by urging political parties and candidates to ensure that campaign promises are supported by clear financial calculations.

It argued that Nigerians should not be offered policies whose immediate benefits could eventually translate into higher public debt, reduced investment in infrastructure and social services, and increased pressure on the national currency.

“Political promises must be backed by fiscal arithmetic,” the Presidency stated.
It called on Atiku and other political actors to engage Nigerians on the full implications of their economic proposals, particularly the financial, legal and administrative consequences of restoring petrol subsidy.

The statement said the country should welcome a robust debate on the cost of living and economic policy, but insisted that such discussions must reflect Nigeria’s present economic and petroleum realities rather than conditions that existed before the ongoing reforms.