By Lolu Akinwunmi
While he has not explained how he’s going to operate his subsidy differently from the past, destructive model, and we are waiting for his model, it’s clear that subsidy in whatever form is not good for us and we should not return to it in any contrived form.
I believe the weakness in his argument is that it makes subsidy sound much easier to target and contain than experience suggests. Subsidising crude supplied to local refineries may be different in structure from subsidising imported petrol, but economically it is still a subsidy: someone ultimately pays the difference between the market value of the crude and the discounted price. That someone is the Nigerian state.
I understand the economic logic, but I remain unconvinced.
Selling crude to domestic refineries below its market value does not eliminate subsidy; it simply changes where the subsidy sits. The government, and therefore Nigerians, still absorbs the difference through foregone revenue.
More importantly, cheaper crude does not automatically guarantee proportionately cheaper petrol. Refining costs, exchange rates, distribution, margins and inefficiencies remain. And once government begins administratively determining who gets discounted crude and at what price, we risk recreating the distortions, arbitrage and opportunities for abuse that made the old subsidy regime so problematic.
Yes, cheaper energy can reduce logistics costs and inflation. But the more sustainable route is to increase domestic refining, improve competition, stabilise the macroeconomy and provide targeted support for those most affected by reform.
Having finally taken the difficult decision to remove a fundamentally unsustainable subsidy system, Nigeria should be extremely careful about recreating it under another name.
If the Reform has some imperfections, it should be improved, not reversed.
