Economists Warn: Reinstating Fuel Subsidy Could Harm Nigeria’s Economy
Economic and financial experts have warned that any attempt to reinstate petrol subsidy in Nigeria could create fresh economic difficulties and undermine the reforms that the country has been implementing.
The experts broadly agreed that returning to the former subsidy regime would place additional pressure on government finances, weaken macroeconomic stability and potentially discourage investment in the petroleum sector.
They described a return to the old subsidy system as an unsustainable policy that could provide temporary relief to consumers but create greater financial problems for the country in the long term.
The debate follows a promise by former Vice President Atiku Abubakar, who is seeking the presidency under the African Democratic Congress (ADC), that he would review the petrol subsidy policy if elected president in 2027.
President Bola Ahmed Tinubu announced the removal of petrol subsidy on May 29, 2023, saying the funds previously spent on subsidising fuel could instead be redirected towards critical areas of national development.
Among the experts who commented on the issue were Dr Ayo Teriba, Olatunde Amolegbe, David Adonri, Dr Uju Ogubunka, Dr Samson Galadima Simon, Dr Wahab Balogun and Dr Yusha’u Aliyu.
They argued that rather than returning to a blanket fuel subsidy, government should use the resources saved from subsidy removal, alongside additional revenue generated through economic reforms, to fund infrastructure, social interventions and targeted support for Nigerians facing the greatest economic hardship.
Teriba: Subsidy Proposal Is More Political Than Economic
Economist Dr Ayo Teriba described the proposal to reinstate petrol subsidy as being driven more by politics than economics.
He explained that politicians often make promises that appeal to voters but can become difficult to implement once they assume office.
According to Teriba, returning to petrol subsidy could reduce investor confidence and negatively affect businesses operating in Nigeria's oil and gas industry.
He stressed that fuel prices should reflect economic realities in order to encourage both domestic and foreign investment.
However, he said this did not mean government should abandon support for vulnerable Nigerians.
Teriba argued that instead of subsidising petrol for everyone, government could direct assistance towards people who genuinely need it.
“Subsidy will always exist, but it is important to do it the right way.”
He pointed to measures such as supporting the conversion of vehicles to CNG, encouraging electric vehicles and providing education and other public services through targeted intervention programmes and affordable financing.
Amolegbe: Nigeria Cannot Sustain the Old Subsidy Regime
Olatunde Amolegbe, an investment expert and former president of the Chartered Institute of Stockbrokers, said it would be difficult for Nigeria to return to the former petrol subsidy system.
He said the country's finances were not strong enough to sustain such a programme.
Amolegbe also questioned who would benefit from a renewed subsidy at a time when domestic petroleum production is increasing.
According to him, restoring the subsidy could undermine the macroeconomic stability that Nigeria has worked to achieve through recent reforms.
He warned that money that should be used for roads, hospitals and other critical infrastructure could once again be diverted into subsidising petrol consumption.
Adonri: Subsidy Could Create Fresh Economic Instability
David Adonri said returning to petrol subsidy was not a sustainable option for Nigeria.
He argued that the Nigerian economy had already begun adjusting to the new fuel-price environment and that reversing the reform could create uncertainty about the government's economic direction.
According to him, such uncertainty could pose a threat to economic stability and investor confidence.
Adonri said Nigeria should focus instead on supporting production and industrial development, which could expand economic activity and create employment opportunities.
He also warned that reversing economic reforms for political reasons could distort the allocation of resources within the economy and energy sector.
Balogun: Government Has No Free Money
Dr Wahab Balogun described a complete return to the former petrol subsidy regime as poor economic policy.
He recalled how fuel subsidies and foreign-exchange interventions consumed significant government resources before the recent reforms.
“Government has no free money.”
Balogun explained that every naira government spends to reduce the price of petrol is money that cannot be spent elsewhere unless government increases revenue, cuts other expenditure or borrows.
He warned that Nigeria's existing debt burden makes borrowing at high interest rates to subsidise fuel particularly risky.
Such borrowing, he said, could provide temporary relief at the pump while leaving the country with a heavier financial burden in the future.
However, Balogun stressed that Nigerians must see tangible benefits from the money saved through subsidy removal.
He acknowledged that the reform had increased pressure on households because transportation, food, farming and production costs had risen.
He therefore argued that the success of the reform should not be measured only by how much money government saves, but also by whether the savings eventually improve the living conditions of ordinary Nigerians.
Galadima: Benefits Should Reach the Poor
Dr Samson Galadima Simon noted that many economists and international financial institutions had supported the removal of petrol subsidy because the government had previously been paying a substantial portion of the actual cost of fuel consumed by Nigerians.
He argued that instead of restoring the old system, part of the benefits generated by subsidy removal should be directed towards the poorest and most vulnerable members of society.
Galadima called for a clear and transparent social-support system capable of identifying genuinely vulnerable households and providing assistance to them.
He warned that such programmes must not become a means of political patronage or selective distribution of public funds.
He also said government should not expect market reforms alone to automatically improve the lives of every Nigerian.
According to him, even when economic indicators such as foreign reserves and the stock market improve, ordinary citizens may not immediately feel the impact in their daily lives.
What Nigerians want to see, he said, is a reduction in food prices and genuine improvement in infrastructure and essential services.
Aliyu: Legal Issues Must Also Be Considered
Dr Yusha’u Aliyu said the Petroleum Industry Act of 2021 established a legal framework governing the petroleum sector, meaning that any attempt to restore the former subsidy system would require careful consideration of the legal and political implications.
He argued that the matter could not simply be handled through a political announcement because reinstating the old system could require changes to existing regulations governing the petroleum industry.
Aliyu also pointed to factors including the exchange rate, Nigeria's domestic refining capacity and the operations of the Nigerian National Petroleum Company Limited (NNPC Ltd).
He said these issues would have to be considered before any major decision was made regarding the future of petrol pricing and government intervention.
Ogubunka Criticises Atiku's Proposal
Dr Uju Ogubunka criticised Atiku Abubakar's promise to restore petrol subsidy, arguing that the focus should instead be on ensuring that Nigerians benefit from the resources made available by the removal of the subsidy.
She said government and citizens should be discussing how to use the gains from the reform to provide meaningful support to Nigerians rather than returning to the old system.
Ogubunka maintained that the priority should be making sure that the benefits of economic reforms reach ordinary people.
Experts Call for Targeted Support
The experts' concerns come at a time when the cost of living remains a major issue for Nigerians, particularly because petrol prices affect transportation, food distribution, agriculture, manufacturing and other areas of economic activity.
While subsidy removal has increased government revenue and reduced the direct financial burden of subsidising petrol, the experts said the benefits would have little meaning to ordinary Nigerians if they did not translate into better living conditions.
They therefore called for stronger social intervention programmes alongside investments in infrastructure, healthcare, education, roads and job creation.
They also stressed that any assistance provided by government should be targeted at those who need it most rather than subsidising fuel consumption for the entire population.
Subsidy Debate Continues Ahead of 2027
The debate over petrol subsidy is likely to remain an important political and economic issue ahead of the 2027 presidential election, particularly as political parties and candidates present different approaches to the country's economic challenges.
Atiku has argued that the subsidy savings should be better utilised and has promised to reconsider the policy if elected.
The economists, however, warned that simply returning to the old subsidy system could place renewed pressure on public finances and reverse some of the gains from the ongoing economic reforms.
They maintained that Nigeria's priority should be to ensure that the resources saved from subsidy removal are transparently and efficiently invested in areas capable of improving the lives of citizens.
For them, the alternative to the old subsidy system is not abandoning Nigerians to rising costs, but targeted assistance for vulnerable households combined with long-term investment in infrastructure, healthcare, education, agriculture, industry and employment.
The central question, therefore, is not only whether petrol should be subsidised again, but how the money saved from subsidy removal can be used to deliver measurable economic benefits to Nigerians.