9News Nigeria Exclusive Story by Chinedum Anayo | Abuja, Nigeria
President Bola Ahmed Tinubu’s renewed declaration that fuel subsidy will not return has reopened an important national conversation about Nigeria’s economic direction, the cost of governance and the responsibility of government to protect citizens from economic hardship.
His position that Nigeria cannot continue spending the future of its children to subsidise present-day consumption reflects an economic argument that deserves serious consideration.
However, the success of that argument will ultimately depend not on the government’s ability to defend subsidy removal but on its willingness to ensure that Nigerians benefit from the resources saved.
Fuel subsidy was introduced and sustained for decades as a means of making petroleum products affordable to Nigerians.
While the policy offered some immediate relief, its implementation became increasingly expensive, controversial and difficult to sustain.
The advantages of fuel subsidy
There is no denying that fuel subsidy had certain advantages, particularly for ordinary Nigerians.
Affordable transportation: Subsidised petrol helped keep transport fares relatively lower, reducing the cost of commuting for workers, students, traders and other citizens.
Lower cost of goods and services: Since transportation and logistics depend heavily on petroleum products, cheaper fuel helped moderate the cost of moving food, raw materials and finished goods.
Relief for low-income households: Families with limited earnings benefited from the lower cost of transportation, cooking and other activities indirectly affected by fuel prices.
Support for businesses: Small businesses that depended on generators, commercial vehicles and petroleum-powered equipment enjoyed some relief from operating costs.
Short-term economic stability: Subsidy helped cushion consumers against sudden increases in international crude oil prices and domestic fuel costs.
These benefits explain why many Nigerians remain nostalgic about the policy and why its removal has generated considerable public dissatisfaction.
The numerous disadvantages of fuel subsidy
Despite these advantages, the Nigerian experience exposed serious weaknesses that made the policy increasingly difficult to justify.
Enormous financial burden: Government expenditure on fuel subsidy consumed resources that could otherwise have been invested in healthcare, education, roads, electricity, security and other critical infrastructure.
Corruption and diversion: The subsidy regime was repeatedly associated with allegations of inflated petroleum consumption figures, fraudulent claims, diversion of products and other abuses that deprived Nigerians of the intended benefits.
Unequal distribution of benefits: Fuel subsidy was not necessarily a fair social intervention. Nigerians who consumed more petrol, including wealthier households and businesses, generally benefited more in absolute terms than those who consumed less.
Encouragement of smuggling: The difference between subsidised domestic fuel prices and higher prices in neighbouring countries created incentives for cross-border smuggling, resulting in further losses to the Nigerian economy.
Discouragement of investment: An unpredictable and heavily regulated petroleum market discouraged investment in refining, distribution and other areas of the downstream oil sector.
Dependence on imported petroleum products: The subsidy system helped sustain a structure in which Nigeria remained vulnerable to imported fuel costs, foreign exchange pressures and international market fluctuations.
Opportunity cost: Perhaps the greatest disadvantage was the amount of public money committed to keeping petrol artificially cheap instead of developing productive sectors capable of generating employment, wealth and sustainable economic growth.
Fiscal uncertainty: Government expenditure on subsidy was exposed to fluctuations in crude oil prices, exchange rates and petroleum consumption, making long-term budgetary planning difficult.
Why agricultural subsidies offer a better alternative
President Tinubu’s proposal during the All Progressives Congress (APC) Presidential Campaign in Jigawa State on Tuesday to support farmers through agricultural subsidies and interest-free loans presents a potentially more productive approach to government intervention.
Unlike fuel subsidy, which primarily reduces the price consumers pay for a commodity, agricultural support can directly strengthen the capacity of producers to generate wealth, create employment and increase food availability.
Nigeria is an agriculturally endowed country, yet millions of citizens remain vulnerable to food insecurity, high food prices and inadequate agricultural productivity.
Supporting farmers with subsidised fertilisers, improved seedlings, tractors, irrigation facilities, modern farming equipment and accessible financing could produce benefits that extend beyond individual beneficiaries.
There are several reasons this approach deserves consideration.
When farmers have access to affordable inputs, financing and modern equipment, they are better positioned to expand cultivation and improve yields.
Increased production can strengthen domestic food supply and reduce dependence on imported food.
Agriculture has the capacity to create employment across farming, processing, transportation, storage, packaging and distribution.
Supporting farmers therefore has the potential to stimulate economic activities across entire communities.
Although agricultural subsidies may not immediately translate into cheaper food, increased production and improved supply chains can help moderate food prices over time.
Targeted agricultural investments can stimulate rural economies, improve household incomes and reduce the pressure on urban centres caused by rural-to-urban migration.
Expanding agricultural production can also reduce food import bills while creating opportunities for Nigeria to export agricultural commodities and earn foreign exchange.
Agricultural investment can strengthen domestic productive capacity, improve industrial raw material supply and contribute to economic diversification away from excessive dependence on crude oil.
The government must avoid repeating the mistakes of fuel subsidy
Nevertheless, agricultural subsidies are not automatically immune to corruption, waste or mismanagement.
If poorly implemented, they could become another avenue for political patronage, inflated contracts, diversion of fertilisers, fictitious beneficiaries and the concentration of public resources in the hands of politically connected individuals.
Interest-free loans must also be transparently administered, with clear eligibility requirements, proper monitoring and repayment arrangements that protect public funds.
Government must ensure that genuine smallholder farmers, cooperatives, commercial agricultural enterprises and rural producers have access to these interventions.
There must also be adequate investment in rural roads, electricity, irrigation, storage facilities, food processing and security.
Giving farmers subsidised fertilisers and loans without addressing these structural challenges will only produce limited results.
Most importantly, the savings from fuel subsidy removal must translate into measurable improvements in the lives of Nigerians.
Citizens cannot be expected to endure higher transportation costs, rising food prices and declining purchasing power indefinitely without seeing corresponding improvements in public services and economic opportunities.
President Tinubu’s refusal to restore fuel subsidy may remain politically unpopular, particularly among Nigerians struggling with the rising cost of living.
However, economic decisions should not be judged exclusively by their immediate political consequences but also by their long-term implications for national development.
A government cannot sustainably build a prosperous economy by continually spending resources to make consumption cheaper while neglecting the productive capacity required to generate wealth.
The better alternative is to invest in sectors that create value, expand employment, strengthen domestic production and improve the living conditions of citizens.
In this regard, redirecting government support towards agriculture, particularly through transparent subsidies and interest-free loans, represents a more development-oriented approach than returning to the old fuel subsidy regime.
Nigeria does not merely need an end to fuel subsidy; it needs a productive economy in which citizens can afford the necessities of life without depending on unsustainable government interventions.
