Farooq Kperogi is right about one thing: Atiku Abubakar’s obsession with President Bola Ahmed Tinubu’s old forfeiture controversy and the Chicago State University saga has yielded diminishing political returns. Nigerians have heard these arguments repeatedly, and neither controversy addresses the economic reality confronting households today.
But Kperogi makes a serious analytical mistake when he moves from that legitimate observation to treating Atiku’s renewed promise to restore petrol subsidy as a credible economic alternative.
It is not.
Atiku may have discovered a potent campaign message, but he has not discovered a solution to Nigeria’s economic problems. In fact, his proposal risks resurrecting one of the very structural problems Nigeria has spent years trying to escape.
The central deception in the subsidy debate is contained in the simple question: “Where is the money saved from subsidy removal?” It turns my tummy when I hear even very highly educated folks parrot this silly question.
That question sounds compelling politically but betrays a fundamental misunderstanding of how the old subsidy system operated.
There was no giant pot of money sitting in a government account, labelled “petrol subsidy”, which suddenly became available when Tinubu removed the subsidy.
The subsidy was a fiscal burden. Nigeria was effectively paying the difference between the economic cost of supplying petrol and the artificially low price at which it was sold. When the government could not transparently fund that obligation through the budget, the burden was shifted elsewhere, including onto NNPC and ultimately against oil revenues. Or should we start explaining this in our local languages?
The IMF documented precisely this problem: when subsidy payments were not provided for in the budget, the costs were borne by NNPC and deducted from oil revenues accruing to the Federation Account. That is why money to be shared between the FG and sub-nationals were abysmally low every month under the Buhari government and many states cannot meet their basic obligations.
The World Bank found that by 2022 the subsidy had become extraordinarily expensive, consuming 32.4 percent of total government revenues and costing about 2.2 percent of GDP. NNPC had also accumulated approximately ₦2.8 trillion in subsidy arrears by the end of 2022. You can fact-check this.
That is the part of the story Atiku’s “where is the money?” question conveniently leaves out.
The important economic gain from subsidy removal is therefore not necessarily a pile of cash that government can point to and say, “Here is the money Nigerians used to spend on subsidy.” The gain is the fiscal obligation that government no longer has to finance.
Indeed, the World Bank estimated that subsidy removal would generate significant fiscal gains compared with a scenario in which the subsidy continued. However, it simultaneously warned that existing subsidy arrears would absorb a substantial portion of those gains. Its analysis showed that the ₦2.8 trillion in arrears owed to NNPC would significantly reduce the immediate fiscal savings available to the Federation.
That is why revenue accruing to the Federation Account was initially low, even after subsidy payments had stopped. As the government gradually cleared those inherited arrears, the fiscal position began to improve, and Federation Account revenues started increasing. This helps explain why Nigeria can now afford to share about ₦3 trillion in the latest FAAC allocation.
This distinction is crucial.
If a government is borrowing or accumulating arrears to finance a recurring obligation, stopping that obligation does not mean the same amount of cash suddenly appears in the treasury. It means government has stopped creating a hole that it previously had to finance.
That is what subsidy removal accomplished.
And this is why Atiku’s proposal deserves to be taken to the cleaners economically.
Cheap petrol is not free petrol.
Atiku’s proposed “reformed” subsidy sounds attractive because it attempts to make the policy appear more sophisticated. He reportedly wants the subsidy to follow domestically produced crude, with preferential crude supply to qualifying Nigerian refineries, an annual spending ceiling and mechanisms to prevent diversion.
But none of those mechanisms changes the fundamental economics. I am not an economists but this is commonsensical enough that I am shocked that a former VP can think he can gaslight Nigerians with his faulty economic diatribe.
If government gives a refinery crude below its economic value so that petrol can be sold below its market-reflective cost, somebody bears the difference.
If government bears it, it is a subsidy.
If NNPC bears it, the Federation ultimately loses revenue.
If government borrows to finance it, taxpayers inherit the liability.
If government accumulates arrears, the liability simply moves into the future.
Changing the mechanism does not eliminate the cost.
The subsidy may “follow the barrel”, as Atiku puts it, but the bill will still follow the Nigerian taxpayer.
That is the economic reality Kperogi’s article does not adequately confront.
The argument that “every country subsidises something” is beside the point
Kperogi argues that functional societies subsidise things such as agriculture, healthcare, housing, transportation and energy.
That is true.
But it does not establish that Nigeria should restore petrol subsidy.
The question is not whether subsidies are inherently evil. The question is whether a particular subsidy is affordable, transparent, properly targeted and economically productive.
Nigeria’s old petrol subsidy failed spectacularly on those measures.
The World Bank described it as opaque, fiscally unsustainable and socially unfair. It also found that poorer Nigerians captured only about 3 percent of the total PMS subsidy, meaning that much of the benefit went to better-off consumers.
That is hardly an efficient poverty-reduction programme.
Why should a government spend scarce public resources subsidising petrol for a wealthy car owner and a poor commuter alike when it could target assistance directly at the people who need it?
That is the fundamental weakness in Atiku’s proposition. Subsidy removal can be necessary and still be painful
None of this means Nigerians have not suffered from subsidy removal.
They have. Pretending otherwise would be dishonest. The World Bank itself acknowledged that the reform produced severe short-term pain, including a dramatic increase in petrol prices, and emphasised the need for social protection to cushion vulnerable households.
That is precisely where the Tinubu administration should be challenged, but not with Atiku’s current wave of the brain commentary to bring back subsidy. That is to expensive a joke!
Removing subsidy does not absolve government of the responsibility to protect citizens from the consequences of the reform. Government must ensure that fiscal space created by the reform translates into better public transportation, infrastructure, social protection, healthcare, electricity and other measures that reduce the cost of living.
Has the Tinubu government been able to bridge that gap? This is where the debate should become intellectually honest.
The question should be if the Tinubu government have adequately cushion Nigerians from the consequences of subsidy removal. That is a valid question that should come from an opposition candidate, not an argument for reversing the reform.
The IMF had already recommended permanent fuel-subsidy removal before Tinubu’s presidency, a recommendation Atiku agreed and campaigned with in 2022/23. The World Bank reached essentially the same conclusion.
So this is not simply Tinubu’s personal “neoliberal theology”, as Kperogi characterises it. It was a structural fiscal problem recognised before Tinubu came into office.
Atiku’s biggest problem is his own history. This is an uncomfortable question Atiku must answer. He campaigned in 2023 on removing petrol subsidy within his first 100 days. Now, as another presidential election approaches, he wants to restore it.
Politicians are allowed to change their minds. If Atiku genuinely believes that subsequent evidence has altered his economic judgment, he should explain precisely what changed. But the basic fiscal mathematics have not magically disappeared.
Nigeria still has competing demands for scarce public resources.
Nigeria still has revenue constraints.
Nigeria still has debt obligations.
Nigeria still has an enormous infrastructure deficit.
And Nigeria still has millions of citizens who need targeted social protection.
So what exactly will Atiku sacrifice to subsidise petrol?
That is the question Kperogi should have pressed him on, and not go to town with Atiku’s new sing song.
Because there is no such thing as free petrol. The political genius of the subsidy promise is precisely why it is dangerous. Atiku’s proposition is politically clever because the pain of subsidy removal is immediate and visible.
The motorist sees the price at the filling station.
The commuter sees the transport fare.
The trader sees the cost of moving goods.
The family running a generator sees the cost of electricity.
But the fiscal benefit of ending subsidy is invisible.
Nobody wakes up in the morning and says, “Thank God Nigeria did not borrow another trillion naira to finance petrol subsidy.”
That is why politicians can exploit the issue so easily.
The public experiences the pain of reform today, while the benefit of avoiding an unsustainable fiscal burden is dispersed across government finances.
Atiku can therefore promise Nigerians cheaper petrol without immediately showing them the bill. But the bill does not disappear. It merely moves from the filling station to the government balance sheet. And eventually, from the government balance sheet to the taxpayer.
Tinubu should answer the criticism — but not reverse the reform. The President therefore has every reason to respond to Atiku’s argument.
Not because Atiku has discovered an economic miracle, but because he has identified a politically powerful vulnerability: Nigerians are still hurting, and the benefits of reform have not yet become sufficiently visible in their daily lives. But this is an expected outcome of the kind of economic reform journey Nigeria is on.
Tinubu must therefore demonstrate what happened to the fiscal space created by subsidy removal.
He must show Nigerians how much was saved, how much went into clearing inherited obligations, how much has gone into social protection and what additional benefits citizens can expect. That is legitimate accountability.
But accountability does not require surrendering economic logic. The answer to a reform whose benefit have not totally percolated is not necessarily to restore the policy that created the original problem. The answer is to complete the reform.
The World Bank’s position has essentially been that subsidy removal created an opportunity to rebuild fiscal space and redirect scarce resources toward development, while warning that the reform must be accompanied by measures protecting vulnerable Nigerians. That is the sensible middle ground.
Atiku is selling relief; Nigeria needs sustainability
Kperogi is right that Nigerian politics should move away from endless arguments about old controversies and toward policy. But if policy is what we want, then politicians must be held to a higher standard.
Atiku cannot simply say Nigerians are suffering and therefore subsidy should return. Everybody already knows Nigerians are suffering.
The question is how to make them suffer less without recreating the fiscal mechanism that helped put the country in this position. That requires more than a fake promise at a campaign rally.
It requires answers about what government will no longer be able to fund in order to keep petrol artificially cheap. And above all, it requires Nigerians to understand that the price they see at the petrol pump is only one part of the real price.
A petrol subsidy can make fuel cheaper today while making government poorer tomorrow.
And when government becomes poorer, it borrows.
When it borrows, debt grows.
When debt grows, future revenues are consumed by debt service.
And when future revenues are consumed by debt service, the same citizens who celebrated cheap petrol eventually pay for it through higher taxes, weaker public services, inflation or reduced government investment. That is not economic compassion. It is deferred pain disguised as immediate relief.
Atiku’s proposal may therefore be an excellent campaign strategy. But it is a poor substitute for economic strategy. Nigeria should not return to the politics of artificially cheap petrol simply because the politics of reform have become difficult.
The real challenge before both Tinubu and Atiku is not who can promise Nigerians cheaper petrol. It is who can build an economy in which Nigerians can afford petrol without the government having to borrow to make it cheap.
That is the economic conversation Nigeria should be having.
©Kay Lord, 220826
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