Fuel subsidy: Let’s debate the real solution to Nigeria’s cost-of-living crisis, By John Okiyi Kalu

Government does not have to keep petrol artificially cheap forever. It needs to make transport, electricity, food production and household incomes progressively less dependent on cheap petrol… That is the conversation I want to hear from serious presidential candidates in 2027.

On 29 May, 2023, petrol was selling at roughly ₦195 per litre at the prevailing official pump price in many parts of Nigeria. Within days of President Tinubu’s declaration that “subsidy is gone,” prices jumped dramatically, with the NNPC subsequently announcing new prices ranging from about ₦488 to ₦555 per litre depending on location.

Today, petrol is selling at roughly ₦1,230–₦1,300 per litre, depending on location and filling station. Working with the upper end of those two figures — ₦195 and ₦1,300 — returning petrol to ₦195 would require a subsidy of about ₦1,105 per litre.

The question proponents of subsidy reinstatement — including Alhaji Atiku Abubakar — need to answer is simple: What price are they actually promising Nigerians? Are they proposing to return petrol to the pre-Tinubu price of ₦195, or to some other price?

Because the numbers matter.

Using the current daily petrol consumption figure of approximately 47.4 million litres, a subsidy of ₦1,105 per litre would cost:

₦52.377 billion every day.

That is approximately:

• ₦1.571 trillion in 30 days
• ₦19.017 trillion in a year

That is the scale of the fiscal commitment we are discussing if the objective is to take petrol back to ₦195 per litre.

And this brings me to another argument I find increasingly misleading: the tendency to discuss increased allocations to states, as though every naira received by a state has to be converted into dollars before it can have value.

That is simply not how public expenditure works.

A significant portion of state expenditure is domestic and relatively insensitive to movements in the dollar exchange rate — particularly personnel costs, pensions, gratuities and locally paid salaries. Of course, some overheads, infrastructure projects and debt obligations have varying degrees of FX exposure, but it is wrong to assume that every increase in federal allocation is automatically eroded by exchange-rate movements.

At the same time, we must acknowledge a fundamental fact: Nigeria’s major foreign-exchange earner remains crude oil, whose value and government revenue are heavily influenced by global oil prices and other international market conditions.

So, where exactly is the problem?

There is a school of thought that appears to believe that Nigeria’s current economic hardship is entirely the consequence of petrol subsidy removal.

I disagree.

Subsidy removal undoubtedly made the cost-of-living crisis worse. It increased transport costs and fed into the prices of food and other goods. But Nigerians were already suffering before 29 May, 2023. Subsidy was still in place, yet inflation, unemployment, poor electricity supply, insecurity, weak purchasing power and widespread poverty were already serious problems.

Fuel is one part of Nigeria’s cost-of-living crisis — not the whole crisis.

The bigger picture includes:

• Food prices and agricultural productivity
• Exchange-rate depreciation
• Electricity costs and unreliable supply
• Transport
• Housing and rent
• High interest rates and expensive credit
• Unemployment and inadequate wages
• Insecurity
• Taxes, levies and multiple charges
• Poor infrastructure and logistics
• Healthcare and education costs
• Government debt and fiscal pressure

Therefore, reinstating petrol subsidy is not a silver bullet.

Indeed, a blanket subsidy could create another set of problems if it consumes fiscal resources that should be going into healthcare, education, infrastructure, social protection, electricity and productive investment.

And this is where I become particularly concerned about the political conversation.

There appears to be a growing tendency to present “subsidy reinstatement” as the solution to Nigeria’s economic hardship without explaining the price at which petrol would be sold, the annual fiscal cost, how the subsidy would be financed and, most importantly, how the government would prevent the corruption and rent-seeking that characterised the old regime.

If we are serious about protecting Nigerians, the objective should be to subsidise the transition away from subsidy — not necessarily subsidise consumption forever.

What should government actually do?

Reduce the cost of food.

Improve electricity supply.

Provide adequate and affordable public transportation.

Put money directly into the hands of vulnerable households.

Reduce taxes and charges embedded in petroleum distribution.

Increase domestic refining.

Protect small businesses from excessive energy and financing costs.

Increase wages intelligently, in ways that do not simply fuel another round of inflation.

Cut government waste and redirect savings towards citizens.

If we can do these things, Nigerians can progressively become less dependent on cheap petrol to survive.

Government does not have to keep petrol artificially cheap forever. It needs to make transport, electricity, food production and household incomes progressively less dependent on cheap petrol.

That is the conversation I want to hear from serious presidential candidates in 2027.

Not merely:

“We will bring back subsidy.”

Tell us:

At what price?

At what annual cost?

Who will pay for it?

How will you stop the old subsidy cabal from returning?

And, most importantly:

What are you going to do to make Nigerians less vulnerable to the price of petrol in the first place?

Take the debate away from political seduction and bring it to real, measurable and financially sustainable solutions.

Otherwise, I will continue to suspect that some of the advocacy is less about solving Nigeria’s economic problems and more about seducing voters while protecting the same entrenched economic interests that helped take us to the “land beyond beyond, from the world past hope and fear.”

And in our own Nigerian version of that story, we cannot keep waiting for Sokurah to appear and command the genie to solve our problems.

We have to do the hard work ourselves.

John Okiyi Kalu is a public affairs analyst and former commissioner for Information; Trade and Investment in Abia State