By Alex Ter Adum
From Import Subsidy to Production Subsidy
HE Atiku Abubakar has made his position clear:
“ I initially did not oppose the removal of fuel subsidy. But now that it has been removed, where is the money? Where has the subsidy money gone? Has it been used to improve healthcare, education or security?
If I win the presidential election, I will restore the subsidy. And anyone who stole Nigeria’s subsidy funds must return the money.”
The Atiku Economic Recovery Plan (AERP) 2027 will restore a measure of petroleum subsidy, but it will not return Nigeria to the old system of subsidising imported petroleum products through opaque retail differentials. Instead, the subsidy will be redirected from importation and consumption to domestic production and refining.
The central idea is simple: the government will make it cheaper for Nigerian refineries, private and public, to produce petroleum products locally by supplying them with Nigerian crude at a preferential, subsidised price. In return, participating refineries will be required to meet transparent technical, financial and regulatory standards, refine efficiently and sell their products to the local market at a regulated ex-gantry price determined through an independently verifiable cost formula.
This fundamentally changes the subsidy model.
The former import subsidy operated through a complex chain involving foreign refiners, traders, shipping companies, importers, terminal operators and marketers. Government paid the difference between the cost of imported products and the regulated domestic price, creating considerable opportunities for inflated claims, diversion and leakage.
Under the AERP, subsidy will be concentrated at the point of domestic production. Government will be able to verify the quantity of crude allocated to each refinery, the subsidised price, the volume actually processed, the quantity and type of products produced, the verified refining cost and the final ex-gantry price.
The subsidy will follow the barrel.
Every subsidised barrel must therefore be traceable from allocation to processing and ultimately to refined petroleum products. Subsidy will be tied to verified production, not claims. Refineries that violate the rules will lose access to subsidised crude and face appropriate regulatory and legal consequences.
The economic impact will extend far beyond the filling station. Lower domestic refining costs will reduce petrol and diesel prices, which will reduce transportation and logistics costs across the economy. Farmers will spend less moving produce to markets; manufacturers will face lower production and distribution costs; traders will spend less transporting goods; and businesses will have greater capacity to invest, employ and expand.
As these costs fall, inflationary pressures embedded in the prices of goods and services should moderate. The real value of wages will consequently increase because the same income will purchase more.
The objective, therefore, is not merely cheaper fuel, but greater purchasing power for Nigerians.
The policy will simultaneously accelerate Nigeria’s refining capacity. As domestic production expands, refinery utilisation improves and economies of scale develop, dependence on imported refined products will progressively decline. The subsidy will consequently become increasingly less necessary as domestic refining becomes competitive and self-sustaining.
The AERP will also pursue accountability for the old subsidy regime. Where investigations establish that public subsidy funds were unlawfully obtained, diverted or stolen, those responsible will be pursued for recovery and prosecution in accordance with the law.
The fundamental philosophy is clear: Nigeria’s crude should first serve Nigerians; subsidy should support Nigerian production and jobs at home rather than foreign refining; and the benefits of petroleum resources should be transmitted throughout the Nigerian economy.
The Atiku Economic Recovery Plan therefore represents a shift from import subsidy to production subsidy, from consumption to production, from opacity to accountability, and from petroleum wealth to greater purchasing power and prosperity for Nigerians.
*Alex Ter Adum, PhD*
