The proposed return of Nigeria’s petrol subsidy regime could recreate the economic distortions that the policy was meant to eliminate, Dr Kazeem Bello, a global financial analyst and principal manager/CEO of Afrique Capital and Equity Funds Limited, has warned.
He shared his thoughts with Pinnacle Daily in response to a pledge by the African Democratic Congress presidential candidate, Atiku Abubakar, to restore the petrol subsidy if elected president in 2027.
Pinnacle Daily earlier reported that Atiku said he did not oppose the removal of the subsidy but questioned how the savings from its removal had been used.
“I did not oppose the removal of the oil subsidy, but where is the money? Where did it go? It was intended to reduce poverty and help children attend school. Where is the money now? It seems they are just stealing it,” Atiku said in Hausa.
He added that he would restore the subsidy if elected and ensure that anyone found to have stolen the funds refunds the money.
“Savings should have been used for development,” he said.
But Bello argued that returning to subsidies would address the symptoms rather than the underlying cause of Nigeria’s worsening cost-of-living pressures.
Subsidy could trigger wider intervention
Bello said restoring petrol subsidy would inevitably create pressure for government to extend similar interventions to other sectors, potentially recreating a broad system of subsidies that could constrain investment and economic growth.
“Once you subsidise fuel, then you must go back to subsidise electricity, which is what is killing fresh investment in our power infrastructure; then you go back to fraudulent forex market subsiding again, and then you must subsidise transportation, then you must subsidise education and the list is endless,” he said.
According to him, such a policy would create “another round of impediment for an egalitarian economy with growth prospects for enterprise and entrepreneurship development.”
He argued further that the central economic problem is not simply the price of petrol but the inability of wages and salaries to keep pace with the cost of goods and services.
“The issue is never about fuel subsidy. The issue is about poor and totally out of tune with the global standard on wages and salaries system in Nigeria,” Bello said.
He noted that Nigerians have experienced declining disposable income because wages and salaries have remained stagnant while prices have increased.
“The problem creating poverty in Nigeria is simply the incompatible disposable income of average Nigerians compared to the increases in price level,” he said.
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Better pay, not blanket subsidies
Bello said the government should focus on creating an economic environment in which wages rise sufficiently to allow workers to afford essential goods and services without relying on government subsidies.
“What any serious Government should do is to create an atmosphere where wages and salaries will be duly enhanced to reflect the capacities of Nigerian consumers to be able to afford general essential goods, services and products,” he said.
He argued that targeted social welfare should remain available for genuinely vulnerable Nigerians, but warned against treating almost the entire population as beneficiaries of subsidies.
“Subsidies are socio-welfare programmes and not economic strategic tools to solving a visible economic problem,” Bello said.
“The problem of poor wages and salaries system in Nigeria is an economic issue and not a socio-welfare issue.”
He said improving disposable income would allow Nigerians to pay for fuel, electricity and other services without requiring broad government intervention.
Wage gap remains the bigger problem
Bello illustrated his argument with the disparity between earnings for professionals in Nigeria and what they can earn for similar work abroad.
“A medical doctor in Nigeria goes home with about N1.5 million monthly in Nigeria, and by the exchange rate that is just a little above $1,000 per month. The next day, the same Dr relocated to the UK and earns $8,000 per month. This is precisely where the problem lies and not subsidies,” he said.
He gave similar examples involving university lecturers and nurses, arguing that the difference shows the weakness of Nigeria’s income structure rather than simply a problem of petrol prices.
“These are the problems. We need to identify and address the problems inherent in our poorly rewarding wage system and how to improve the disposable income of average Nigerians,” Bello said.
He therefore challenged Atiku to focus his economic proposal on how to raise incomes and purchasing power rather than returning to a subsidy regime.
“What I expect Alhaji Atiku to say is how he will solve this problem of creating appropriately income structure that will enable Nigerians to earn adequate income and have a global standard disposable income that will allow Nigerian consumers possess income level to buy without subsidies or government social welfare,” he said.
Bello warned that handing subsidies to a poverty-stricken population would not permanently solve the problem, arguing that it could leave the underlying weakness in Nigeria’s income structure unresolved.
“Returning to the subsidies era is simply a backwards strategy,” he added. “What Nigerians need at this time is a commensurate income and wages system competitive with the rest of the global world that will allow them to earn adequate income and disposable income to buy whatever they need.”
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X