Nigeria’s Petrol Subsidy Debate Has Returned As It Usually Does With Plenty of Heat and Very Little Light in Nigeria

On one side are those who insist that removing the subsidy was an act of courage that must never be questioned. On the other are those who say the hardship that followed is enough reason to bring it back. Between them stands the Nigerian citizen, paying higher transport fares, buying a smaller bag of food with a larger amount of money and wondering why every economic reform eventually arrives at his doorstep carrying an invoice.

The argument has now been reduced to two slogans: “Subsidy is gone” and Bring back subsidy. Unfortunately, neither slogan is an economic policy. Let us begin with the obvious.

The old petrol subsidy had become a national bazaar. Nobody could say with confidence how much petrol Nigerians actually consumed, how much crossed our borders or how many subsidised litres existed only in invoices. The system rewarded waste, encouraged smuggling and created a special class of businessmen who appeared capable of turning paper into petrol and petrol into private fortunes.

It had to end. But saying that the old system was bad does not mean that the manner of its removal was perfect. A driver may choose the correct destination and still take a road so rough that half the passengers arrive without their luggage.

The subsidy was removed before Nigeria had enough public buses, dependable social protection or sufficient domestic refining capacity. Then the naira weakened. The price of petrol rose.

Food prices joined the procession. Before long, almost everything became more expensive. Macroeconomic reform had arrived.

Unfortunately, it did not come alone. The states began receiving larger allocations. The enormous pressure of the old subsidy on public finances was reduced.

These are real gains and should not be dismissed. But a healthier government account is not automatically the same thing as a healthier citizen. Government may receive a larger allocation while the family receives a smaller portion at the dinner table.

Citizens cannot eat fiscal consolidation. They cannot board improved foreign reserves to work. At some point, the gains recorded in Abuja must become visible in the market, on the farm, in public transport, in the clinic and in the household.

That is where the present debate should begin. Nigeria should not return to the old universal subsidy. It was wasteful, unfair and too easy to abuse.

The owner of three large cars naturally consumed more subsidised petrol than the family travelling by bus. The largest benefits therefore went not always to the poorest Nigerians, but often to those with the biggest fuel tanks. If government wants to help ordinary people, it should begin with the bus not the private fuel tank.

Support public transportation and insist on lower fares in return. Put more buses on busy routes. Help genuine transport operators convert their vehicles to gas where practical.

Make the arrangement public, measurable and easy to monitor. The same principle should apply to food. Petrol prices become especially painful when they increase the cost of moving tomatoes, rice, yams and other produce from farms to markets.

Assistance can therefore be directed towards recognised farmers’ cooperatives and verified food transport routes. That way, public money would reduce the cost of moving people and food, rather than quietly subsidising weekend traffic in luxury vehicles. Nigeria must also encourage domestic refining but with its eyes open.

Producing petrol at home is clearly better than depending almost entirely on imports. It can conserve foreign exchange, create jobs and improve energy security. But we must not assume that every litre refined in Nigeria will automatically be cheap. An expensive litre does not become affordable merely because it has a Nigerian birth certificate.