Why Atiku’s subsidy plan is flawed – Tinubu’s aide

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Special Adviser to President Bola Tinubu on Media and Public Communication, Sunday Dare, has criticised the proposal by the presidential candidate of the African Democratic Congress, Atiku Abubakar, to subsidise crude oil supplied to local refineries.

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Dare said the proposal would create fiscal and market distortions.

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He argued that selling federation crude to local refineries at preferential prices would reduce government revenue.

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The presidential aide stated this in a post on his X handle on Wednesday while reacting to Atiku’s position on restoring fuel subsidy if elected president in 2027.

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He said the proposal, which would involve selling crude to local refiners at discounted prices, would create an “immediate fiscal hole” in the Federation Account.

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“The Arithmetic Flaw in ‘Subsidizing the Barrel’

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“Atiku’s proposition to sell crude to local refineries at ‘preferential prices’ sounds attractive until you look at the fiscal math:

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“Who Pays the Bill? Selling federation crude below market price creates an immediate fiscal hole in the Federation Account, directly slashing allocations to federal, state, and local governments for schools, hospitals, and security.

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“Distorting the Domestic Market: Preferential crude allocations risk creating artificial monopolies, destabilising smaller indigenous modular refiners, and violating the clear deregulatory provisions of the Petroleum Industry Act (PIA).

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“The Return of Smuggling: Any regime that creates a wide gap between Nigerian pump prices and neighbouring West African markets guarantees a return of cross-border fuel arbitrage, no matter how many ‘auditors’ are promised.

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“This idea is an economic safari. Applying painkillers to a festering wound.”

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Dare’s comments followed Atiku’s renewed insistence that he would restore fuel subsidy if elected president in 2027.

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Atiku had on Tuesday said his position on subsidy had not changed, while disowning comments by one of his media aides, Paul Ibe, who had suggested that the intervention would be gradually phased out as the economy recovered.

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“Earlier, one of my press aides contradicted me in a policy statement as far as subsidy is concerned.

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“I want to repeat categorically that when I said I would return to subsidy, I will! Nigeria is rich enough to look after the welfare of its citizens. Let it be clearly stated that he was not speaking on my own authority,” Atiku said.

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Ibe had earlier explained that Atiku’s proposed subsidy would be tied to crude oil production and domestic refining, with crude supplied to local refiners at a discounted price.

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He said the arrangement would provide temporary relief, stimulate economic activity and reduce the cost of fuel.

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“The crude oil will be sold at a discounted price, subsidised to refiners, and that will enable refiners to be able to produce fuel and diesel at a cheap cost. And when they produce cheaply, they will sell at the real pump price,” the aide said.

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Dare, however, argued that preferential crude allocations could distort the domestic market and create artificial monopolies while undermining smaller indigenous modular refineries.

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He also said the arrangement could create a price gap between Nigeria and neighbouring West African countries, potentially encouraging cross-border fuel smuggling.

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Atiku’s position has revived debate over the removal of petrol subsidy, which Tinubu announced at his inauguration on May 29, 2023.

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The administration has defended the policy as necessary to strengthen public finances, while Atiku has argued that the removal has contributed to increased living costs for Nigerians.

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