By Kazeem Ugbodaga
The Federal Government has challenged former Vice President, Atiku Abubakar to explain how he would finance his proposal to restore petrol subsidy, warning it could undermine Nigeria’s economic reforms.
The government’s position was contained in a statement on Thursday by Bayo Onanuga, Special Adviser to President Bola Tinubu on Information and Strategy.
Atiku, a presidential candidate, has proposed restoring petrol subsidy as part of his economic plans, a position that differs from his earlier advocacy for the removal of the subsidy regime.
Onanuga said Atiku was entitled to propose alternative policies but argued that Nigerians deserved to know the financial, legal and economic implications of returning to petrol subsidy.
According to him, subsidy was not money sitting in government coffers for distribution to consumers but the difference between the cost of supplying petrol and the regulated pump price, which government was required to absorb.
He said reviving the scheme would therefore require government to identify its funding source and establish how it would operate within the current legal and regulatory framework governing the petroleum industry.
Onanuga noted that the Petroleum Industry Act provided for the removal of petrol subsidy by the end of June 2023, adding that the Tinubu administration merely accelerated its implementation.
He said Nigeria’s petroleum industry had also undergone significant changes since the subsidy regime was dismantled, particularly with the emergence of substantial domestic refining capacity.
The presidential aide cited the Dangote Refinery and other local refineries as evidence that Nigeria was gradually moving away from its long-standing dependence on imported refined petroleum products.
He argued that restoring subsidy could undermine investment in domestic refining and reverse some of the gains recorded in the sector.
Onanuga further said the removal of petrol subsidy had increased revenues available to the three tiers of government through the Federation Account.
He cited the approximately N3 trillion shared by the federal, state and local governments in July as an indication of improved public revenues following the removal of petrol price and foreign-exchange distortions.
The government, however, acknowledged the pressure caused by higher petrol prices, transportation costs and energy expenses on households and businesses.
Onanuga said the administration was pursuing alternatives, including the expansion of compressed natural gas as a cheaper energy source for vehicles.
He said CNG could significantly reduce operating costs for taxis, cars and distribution vehicles, noting that companies such as Dangote and BUA had introduced CNG-powered trucks into their fleets.
The presidential aide said the subsidy debate should focus on how to provide sustainable relief to Nigerians without recreating a system that places an unsustainable burden on public finances.
He questioned how much a restored subsidy regime would cost annually, where the funds would come from and whether government would have to borrow to finance it.
He also asked whether implementing the proposal would require amendments to the Petroleum Industry Act and other petroleum-sector regulations.
Onanuga further questioned how subsidy payments would be verified and protected against the abuses and leakages associated with the previous regime.
He argued that the growing capacity of domestic refineries had fundamentally changed Nigeria’s petroleum landscape and should form part of any discussion about petrol pricing and affordability.
According to him, policymakers must determine precisely what any proposed subsidy would support, including local production, transportation, distribution or other components of the petroleum value chain.
He warned that returning to a system with hidden fiscal costs could eventually result in higher public debt, reduced government spending on infrastructure and social services, and additional pressure on the naira.
Onanuga said Nigerians should welcome a robust debate about the cost of living and the country’s economic direction but insisted that political proposals must be supported by clear fiscal calculations.
He urged Atiku and other political actors advocating a return to petrol subsidy to provide Nigerians with detailed explanations of the policy’s financial and legal implications.
