Don’t Take Nigeria Back to the Subsidy Trap

At a time when Nigerians are battling the rising cost of food, transportation and other essential goods and services, the promise of returning fuel subsidy may sound attractive. Many citizens naturally want immediate relief from the economic hardship they are experiencing. However, Nigerians must look beyond the temporary comfort that cheaper petrol may provide and consider the long-term consequences of returning to a policy that placed enormous pressure on the nation’s finances.

President Bola Ahmed Tinubu took the difficult decision to remove fuel subsidy because the old system had become increasingly costly and unsustainable. The decision has undoubtedly brought hardship to millions of Nigerians, and the government must acknowledge this reality and do more to protect vulnerable citizens. However, the hardship created by reform should not become a reason to return to a system that could weaken the country’s economic foundation.

President Tinubu is doing the right thing by resisting a return to an unsustainable blanket fuel subsidy. The priority now should be to improve the implementation of the reforms, reduce the cost of living, protect vulnerable Nigerians and ensure that the savings and benefits from the reforms are invested transparently in areas that can improve the lives of citizens.

Fuel subsidy is not free money. When the government sells petrol below its economic cost, it must pay the difference from public resources. In a country with enormous infrastructure, education, healthcare, electricity and security needs, spending trillions of naira subsidising fuel consumption comes with a huge opportunity cost. Money that could build roads, hospitals, schools, power infrastructure and industries could instead be used to keep the price of petrol artificially low.

There is also the danger of increased borrowing. If government revenue is insufficient to finance a large subsidy, the Federal Government may have to borrow. That could increase public debt and debt-service obligations and leave future generations to pay for today’s consumption. Nigeria cannot build a strong economy by continually borrowing money to make petrol cheaper.

A return to a broad subsidy could also put additional pressure on the naira. Where domestic refining is inadequate, Nigeria still needs foreign exchange for petroleum imports and other transactions. Increased pressure on foreign exchange can weaken the naira, while a weaker currency makes imported food, medicines, machinery, industrial inputs and other essential goods more expensive. Nigerians could therefore find themselves paying less for petrol but more for many other things.

The issue of smuggling is another serious concern. Nigeria has historically experienced large-scale movement of subsidised petrol across its borders because cheaper Nigerian fuel creates an incentive for illegal traders. When that happens, Nigerian taxpayers effectively finance fuel consumption outside the country. Any future intervention must therefore be carefully controlled, transparent and independently audited.

More importantly, a universal fuel subsidy is not necessarily the most effective way to help poor Nigerians. A wealthy household with several vehicles and generators consumes significantly more petrol than a low-income family that depends on public transportation. Consequently, the richer consumer can receive a greater absolute benefit from a general subsidy. If the government genuinely wants to protect vulnerable Nigerians, targeted assistance, affordable mass transportation, food production, healthcare, education and job creation may provide much better results.

This is why Nigerians should carefully examine promises from opposition politicians who advocate a return to subsidy. Political parties have the right to propose alternative policies, but citizens also have the right to ask important questions. How much will the subsidy cost? Where will the money come from? How long will it last? Will the government borrow to finance it? What projects will be sacrificed? What safeguards will prevent corruption and smuggling? What happens when the government can no longer afford it?

These questions should be answered before Nigerians embrace any promise of cheaper petrol.

The present administration, however, must also recognise that economic reform cannot succeed if citizens continue to bear the burden without seeing tangible improvements. The government must ensure that the benefits of reform reach ordinary Nigerians. Savings should be channelled into productive infrastructure, mass transportation, electricity, agriculture, healthcare, education, social protection and employment creation. Nigerians need to see that the sacrifices they are making today are building a better tomorrow.

Nigeria must also move away from the culture of permanently subsidising consumption and focus on supporting production. Rather than continually paying to make imported petrol cheaper, the country should accelerate domestic refining, strengthen electricity generation, develop gas resources and improve transportation infrastructure. A stronger domestic production base will create jobs, reduce dependence on imports, conserve foreign exchange and improve energy security.

If the government decides to provide temporary support to domestic refineries, such support should be limited, transparent, independently audited and subject to a clearly defined financial ceiling and sunset clause. The objective should be to make domestic refining competitive and eventually eliminate the need for government intervention, rather than creating another permanent subsidy burden.

President Bola Ahmed Tinubu took a politically difficult decision by removing the fuel subsidy. The responsibility now is to ensure that the reform delivers meaningful economic benefits to Nigerians. The government must reduce waste, improve accountability, strengthen institutions and ensure that the gains from reform are invested in the productive sectors of the economy.

Nigerians must also look beyond political promises. The country’s economic future cannot be determined by whoever promises the cheapest petrol. The real question should be which policies will create jobs, strengthen businesses, improve infrastructure, stabilise the currency, increase domestic production and give young Nigerians a genuine opportunity to prosper.

Nigeria cannot afford to repeatedly move backwards and forwards between economic reforms and their reversal. Businesses need policy stability, investors need confidence and citizens need an economy capable of creating sustainable opportunities.

The present hardship is real, but returning to an expensive and potentially unsustainable subsidy system is not necessarily the solution. Nigeria needs a balanced approach that combines economic discipline with compassion and reform with social protection.

President Tinubu’s decision may be difficult, but difficult does not necessarily mean wrong. The government must stay the course while making the necessary adjustments to ensure that ordinary Nigerians are protected and that the benefits of reform become increasingly visible.

Nigerians should therefore be cautious about political promises of returning to fuel subsidy. We should not allow temporary relief to blind us to the long-term cost. We should demand clear figures, funding plans and sustainable economic strategies from anyone proposing to reverse the reform.

Nigeria’s future should not depend on the government permanently paying part of the cost of petrol. Our future should depend on domestic refining, reliable electricity, productive industries, agriculture, infrastructure, jobs and a competitive economy.

Let us support policies that build Nigeria’s productive capacity rather than policies that keep Nigerians dependent on government subsidies. Let us choose sustainable prosperity over temporary political promises.