2027: YPP proposes ₦3.2trn fuel subsidy to cut fares

Party projects 45% reduction in transport costs, 7.5% inflation

By John Alechenu

ABUJA — The presidential candidate of the Young Progressives Party (YPP), Arch. Peter Agada, has proposed a targeted, time-bound fuel subsidy scheme projected to cost ₦3.2 trillion in its first year, cut transport fares by up to 45 per cent and bring headline inflation down to 7.5 per cent.

The proposal, contained in a report made available to Vanguard in Abuja on Sunday, centres on LIN cards for verified productive users, including commercial buses and taxis using Premium Motor Spirit (PMS), haulage trucks using Automotive Gas Oil (AGO), domestic airlines using aviation turbine kerosene (ATK), and low-income households using kerosene.

According to Agada, unlike the former universal fuel subsidy regime, the proposed scheme would have spending limits, graduated subsidy bands and an automatic sunset mechanism.

The report estimates the daily subsidised volume at 29.1 million litres, comprising 18.96 million litres of PMS, 9.075 million litres of AGO, 735,000 litres of ATK and 315,000 litres of kerosene.

At October 2026 prices, the scheme would cost ₦11.48 billion daily and ₦349 billion monthly. Its cumulative cost during the first 12 months, beginning in July 2027 when a YPP-led government would assume office, is projected at ₦3.20 trillion.

Annualised at current prices, the cost would rise to ₦4.19 trillion, equivalent to about 77.6 per cent of the ₦5.4 trillion in under-recovery acknowledged by the Ministry of Finance in 2024, according to the report.

Automatic sunset mechanism

The proposal provides for the automatic suspension of subsidies when the ex-gantry price falls to 45 per cent of the prevailing pump price. Subsidies would only resume if the price rises to 55 per cent.

The report states: “The thresholds are: PMS current ₦1,380, sunset ₦621, resume ₦759; AGO current ₦1,850, sunset ₦832, resume ₦1,018; ATK current ₦1,950, sunset ₦878, resume ₦1,072; Kerosene current ₦1,600, sunset ₦720, resume ₦880.”

It projects that, under a 15-to-18-month price-decline scenario driven by domestic refining, PMS ex-gantry prices would fall from ₦1,325 to ₦470 by the 15th month and to about ₦300 by December 2028.

AGO prices are projected to decline from ₦1,720 to ₦620 before reaching ₦400, while ATK would fall from ₦1,900 to ₦700 and subsequently to ₦450. Kerosene prices are projected to drop from ₦1,400 to ₦520 and later to ₦350.

The report projects that the subsidy would end between the 13th and 15th months, corresponding to August and October 2028, as prices decline.

Purchase limits to curb abuse

To prevent abuse, the proposal introduces graduated purchase limits for beneficiaries using LIN cards.

For PMS, each card would cover 250 litres per cycle, with a 60 per cent subsidy on the first 120 litres, an 80 per cent subsidy on the next 80 litres and a 90 per cent subsidy on the final 50 litres. Purchases above the 250-litre limit would attract the full price.

The proposed limits are 400 litres for AGO and 700 litres for ATK, while kerosene purchases would be capped at 70 litres monthly, with a 20 per cent subsidy.

The report says the arrangement is modelled on Iran’s fuel-card system.

Projected impact on transport, inflation

On the expected economic impact, the report projects that the transport fare index would fall from 100 in July 2027 to 73 by the time the subsidy ends, representing a 27 per cent reduction under its baseline scenario. The reduction could exceed 45 per cent as fuel prices approach ₦300 per litre.

Headline inflation, which the report puts at 15.39 per cent, with food inflation at 19.57 per cent as of August 2026, is projected to moderate to about 7.5 per cent once pump prices fall into the ₦300–₦470 range.

The report cites Central Bank of Nigeria studies indicating that a one per cent increase in PMS prices raises headline inflation by 0.9007 per cent, while a similar increase in AGO prices raises it by 0.0591 per cent. It argues that sustained fuel-price reductions would therefore help ease inflationary pressure.

Domestic air travel is also projected to become cheaper. The report estimates that an average fare of ₦23,500 per 100 kilometres would fall to ₦12,925 when ATK subsidies end, representing a 45 per cent reduction. It projects fares of between ₦11,500 and ₦12,900 by February 2029.

Refineries, crude supply underpin plan

The proposed scheme would be supported by a crude allocation of 600,000 barrels per day to domestic refineries under the Naira-for-Crude arrangement, a proposed 49:51 equity structure for the four state-owned refineries modelled on NLNG, an audit of crude-oil hypothecations within 30 days, implementation of Section 181 of the Petroleum Industry Act 2021, and a target of producing three million barrels of crude oil daily.

The report described the proposed subsidy as a temporary intervention rather than a permanent government obligation.

“It is not a permanent subsidy. It is a bridge that ends itself,” it added.