Restoring Fuel Subsidy Would Cost Nigeria N20trn Annually — Economist 

The Centre for the Promotion of Private Enterprise (CPPE) has warned that restoring a universal petrol subsidy would cost Nigeria an estimated N20 trillion annually and reverse the gains of deregulation.

In a policy brief released by the Centre on Sunday, the director/CEO of CPPE, Dr Muda Yusuf acknowledged the severe pressure Nigerians and businesses are facing from rising petrol prices.

He said, “the solution is not to return to the old subsidy regime. Instead, government should preserve the gains of deregulation while using the fiscal savings to deliver mass transit, power, food security and targeted social protection.”

According to Yusuf, Nigeria was spending an estimated $10 to $15 billion annually on petroleum-product imports before the reform. Subsidy and under-recovery obligations also absorbed huge public resources, constrained Federation Account remittances and worsened fiscal pressures.

“Artificially low domestic prices additionally created incentives for arbitrage and cross-border diversion, resulting in Nigerian public resources effectively subsidising consumption outside the country.”

He noted that the old regime was not merely a subsidy problem; it was a major fiscal, foreign-exchange and resource-allocation problem.

CPPE CEO disclosed that “market-based pricing has improved the commercial viability of domestic refining. For decades, suppressed prices and uncertainty weakened incentives for investment in refining capacity.”

Yusuf said, “a competitive domestic refining industry offers benefits beyond petrol, including opportunities in diesel, aviation fuel, petrochemicals, fertiliser and logistics. It also conserves foreign exchange through import substitution and retains engineering and technical jobs in Nigeria.

“Nigeria’s strategic objective should therefore be to transition from dependence on imported petroleum products to becoming a competitive regional refining and petrochemical hub.”

He pointed out that “current calls for intervention are understandable given cost-of-living pressures. However, restoring a universal subsidy would recreate fiscal leakage, FX pressure, smuggling and investment uncertainty.”

CPPE, using a benchmark of 50 million litres daily consumption and an indicative subsidy of N1,050 per litre, CPPE estimated the exposure at N52.5 billion daily, N1.575 trillion monthly, and N19.16 trillion annually, approximately N20 trillion.

“An annual subsidy bill approaching N20 trillion would impose an enormous opportunity cost. It would compete with spending on infrastructure, education, healthcare, security and agriculture,”CPPE said.

The Centre added that higher government borrowing to fund subsidy would crowd out private-sector credit, sustain high interest rates and weaken job creation and economic growth.o

CPPE urged government to prioritise interventions that address the root causes of household vulnerability, stating that “these include expanding affordable mass transit and rail freight, improving grid reliability and accelerating CNG and solar energy, strengthening food production and rural infrastructure, and providing direct support to vulnerable households.”

The Centre also called for better healthcare and education services, and policies to reduce energy and logistics costs for MSMEs.

“Subsidy removal has strengthened revenues available to the three tiers of government. But higher revenues alone cannot justify the reform. Citizens must see tangible benefits,” Yusuf said.

CPPE added that the debate should move ‘beyond the binary question of whether petrol subsidy should be restored’ to how Nigeria can convert reform gains into lower structural costs, stronger domestic production and measurable improvements in citizens’ welfare.