The proposed return of petrol subsidy could plunge Nigeria back into the fiscal difficulties associated with the policy and weaken governments’ ability to sustain the current minimum wage.
This warning was advanced by the National Chairman of the All Progressives Congress (APC), Prof. Nentawe Yilwatda.
Yilwatda said the attraction of cheaper petrol should not obscure the wider financial burden that subsidy would place on government.
This is is particularly concerning at a time when states and the Federal Government are expected to meet increased wage, pension and public service obligations.
He spoke in Abuja while receiving a delegation of economic stakeholders who visited him to discuss the economy, ongoing reforms and prospects for sustainable growth.
His comments followed a recent pledge by former Vice President and African Democratic Congress (ADC) presidential candidate, Atiku Abubakar, to restore petrol subsidy if elected president in 2027.
Atiku has also questioned the utilisation of savings from the subsidy removal, arguing that the funds should have been deployed to tackle poverty and finance development.
But Yilwatda urged Nigerians to look beyond the immediate effect of subsidy on petrol prices and examine how the policy would be financed.
“Subsidy may appear attractive because it promises cheaper petrol, but Nigerians must also ask the bigger question: who pays for the subsidy and what happens to the resources that government must divert to finance it?” he said.
The APC chairman argued that the cost of the policy could extend well beyond the fuel market, potentially affecting government spending on salaries, pensions, education, healthcare and infrastructure.
“A policy cannot be judged only by its immediate benefit at the pump. We must examine its impact on government revenues, salaries, pensions, education, healthcare, infrastructure and the overall capacity of government to meet its obligations to citizens,” he said.
President Bola Tinubu ended the petrol subsidy regime in his May 29, 2023 inaugural address, a decision that immediately pushed up petrol prices and intensified pressure on transportation and household costs.
Yilwatda maintained that the resulting changes in revenue distribution had strengthened the finances of many state governments.
According to him, some states that previously struggled to meet salary and pension obligations, including those making partial payments, had benefited from increased federal allocations following the subsidy removal.
He therefore cautioned against reversing the policy without a thorough assessment of its effect on public finances.
The APC chairman also tied the subsidy debate directly to the sustainability of the new minimum wage.
He said higher wages require dependable government revenue if they are to be maintained alongside other public responsibilities.
“The challenge is not merely to announce higher wages but to create an economic environment in which governments can consistently pay them without sacrificing investment in infrastructure, education, healthcare and other essential services,” he said.
Yilwatda further warned that pressure on government revenue could eventually be felt in the education sector.
He recalled the prolonged disruption of academic activities in Nigerian universities under the previous administration, arguing that fiscal decisions should not recreate conditions that constrain government’s ability to fund essential services.
“A return to a fiscally unsustainable subsidy regime could have consequences far beyond the price of petrol. When government revenue is squeezed, the first victims are often the critical sectors that directly affect the welfare and future of our people,” he said.
The latest exchange is the newest phase of an increasingly heated political and economic battle over one of the most consequential decisions of President Bola Tinubu’s administration.
The controversy was reignited on August 20 when Atiku Abubakar, presidential candidate of the African Democratic Congress (ADC), said he would restore petrol subsidy if elected president in 2027, arguing that the removal of the policy had deepened hardship and eroded Nigerians’ purchasing power.
The former vice president’s position immediately drew a strong response from the Presidency, which accused him of proposing a reversal of a central pillar of Tinubu’s economic reforms.
President Tinubu described the proposal as evidence of “serious ignorance on governance and economy.”
But rather than fading, the controversy intensified after Atiku’s camp offered different explanations of what the proposed subsidy would look like.
His media aide, Paul Ibe, initially said the intervention would be temporary and would eventually be phased out, arguing that it would give households and businesses room to recover from the combined impact of fuel subsidy removal, foreign exchange reforms and electricity subsidy changes.
That explanation was subsequently challenged by another senior Atiku aide, Phrank Shaibu, who said Ibe’s description was an “unauthorised and misleading characterisation” of Atiku’s position.
Shaibu said Atiku would not commit to a fixed date for ending the subsidy, instead linking its eventual withdrawal to increased domestic refining, improved supply and stronger market competition.
Atiku then personally intervened, insisting that his position had not changed and that he would restore what he described as a targeted subsidy.
“I will restore targeted subsidy and put purchasing power back in the hands of Nigerians,” he said, arguing that the objective would be to reduce the chain reaction through which higher petrol prices feed into transportation and food costs.
The development prompted the Presidency to demand details of the proposal, including its projected cost, beneficiaries, funding mechanism and the circumstances under which the intervention would eventually end.
The government argued that Nigerians could not afford a return to an opaque and potentially expensive subsidy system.
