The Independent Media and Policy Initiative (IMPI) has warned that former Vice President Atiku Abubakar’s proposal to restore a form of fuel subsidy could discourage foreign investment and undermine regulatory confidence in Nigeria.
The policy think-tank said the proposal could send a negative signal to international investors by suggesting that Nigeria was returning to regulated petrol pricing after more than three years of pursuing deregulation of the downstream oil sector.
IMPI made its position known in a policy statement issued in Abuja by its Chairman, Omoniyi Akinsiju.
Atiku, in his proposed economic recovery plan, advocated a shift from consumption subsidy to production subsidy. Under the proposal, local refineries would receive crude oil at a discounted price to enable them to sell refined petroleum products to consumers at lower prices.
However, IMPI argued that the model could create uncertainty for investors if commercial operators were required to comply with politically determined pricing arrangements.
Akinsiju said the proposal would require eligible public and private refineries to receive domestic crude allocations at discounted prices on the condition that the savings would be passed on to consumers.
He described the arrangement as convoluted, arguing that it could compel operators, including the Nigerian National Petroleum Company Limited and private refineries, to operate within politically mandated pricing formulas.
“Atiku’s proposal also sends signals to global markets that Nigeria lacks regulatory predictability. This policy shift would scare away international capital and freeze modern Public-Private Partnerships, with repercussions for funding critical legacy infrastructure projects and a damning effect on production and productivity,” he said.
The group further argued that re-regulating petrol prices would undermine the Petroleum Industry Act, which established a framework for a commercially driven downstream petroleum sector.
According to Akinsiju, the proposed intervention could create an “illusion of price reduction” by transferring the cost of the subsidy from direct government payments to discounted crude oil allocations.
He warned that fixed price caps could also reduce commercial incentives for marketers to distribute petrol to remote communities, potentially shifting supplies towards high-volume urban markets such as Lagos, Abuja, Kano and Port Harcourt.
The renewed debate over petrol subsidy comes as Nigerians continue to grapple with the economic impact of the policy introduced by President Bola Tinubu in May 2023.
Tinubu announced the removal of petrol subsidy in his inaugural address on May 29, 2023, arguing that the policy had become unsustainable. The decision triggered a sharp increase in petrol prices and transportation costs.
Petrol prices rose from N175 per litre in May 2023 to about N1,300 by May 2026, representing a 643 per cent increase.
The controversy has since centred on whether the fiscal gains from subsidy removal have translated sufficiently into improved living conditions for Nigerians.
The Federal Government has maintained that subsidy removal freed significant resources for the three tiers of government.
Finance Minister Taiwo Oyedele said subsidy and foreign exchange reforms mobilised N15.8tn for the Federation between June 2023 and December 2025. Of the amount, N5.43tn accrued to the Federal Government, N6.52tn went to states and N3.88tn to local governments.
The government, however, clarified that the N15.8tn did not represent money held in a dedicated account but additional resources mobilised within the wider fiscal system.
Backing the current deregulated model, IMPI argued that returning to a subsidised pricing arrangement could recreate the fiscal challenges associated with the former regime.
Akinsiju said Nigeria had historically suffered deductions from oil revenues to fund petrol subsidy before resources reached the Federation Account, limiting the funds available to state and local governments.
“Atiku’s model repeats this exact pattern. By giving discounted crude oil directly to local refineries, the government creates a massive hidden deduction,” he said.
According to him, such a deduction could reduce revenue flowing into the Federation Account and limit the resources available to states and local governments for infrastructure and basic services.
The group also warned that price controls could lead to fuel shortages in remote areas and encourage the emergence of black markets. It said such developments could increase transportation costs and worsen food inflation, particularly in rural communities.
IMPI urged the government to focus instead on investments capable of increasing productivity and reducing the structural cost of doing business.
“We reiterate that Nigeria’s historical infrastructure deficit cannot be solved by returning to the fiscal policies that created it,” Akinsiju said.
He added that Atiku’s proposed model could amount to replacing a direct cash subsidy with a discount on crude oil revenue.
“Atiku Abubakar’s ‘Follow-the-Barrel’ model replaces a cash subsidy with a crude oil revenue discount. This policy choice risks locking Nigeria back into the same historical cycle: prioritising temporary, popular relief at the pump, while sacrificing the high-quality roads, hospitals, schools, and energy networks required to build a productive national economy,” he said.
However, IMPI’s position comes amid a broader debate among economists and energy experts over whether the complete removal of petrol subsidy has been properly managed.
The Chief Executive Officer of Petroleumprice.ng, Olatide Jeremiah, recently described Atiku’s production-focused proposal as “workable” and “viable”, although he stressed that implementation would be critical.
Jeremiah argued that with petrol prices around N1,300 per litre, government intervention was necessary to reduce the burden on consumers.
He also criticised the effectiveness of the Federal Government’s Compressed Natural Gas intervention, arguing that the limited availability of CNG stations had prevented cheaper gas from translating sufficiently into lower transport fares.
Energy expert Dan Kunle, however, adopted a more cautious position. He said subsidy removal was the right decision but argued that its consequences had not been adequately managed.
Kunle said Nigeria would need to substantially increase crude oil production before it could sustainably dedicate hundreds of thousands of barrels daily to local refineries at discounted prices.
He therefore argued that increased investment in crude production should come before any attempt to redesign the subsidy regime.
Professor Akpan Ekpo also rejected a complete reversal of subsidy removal but supported targeted interventions to protect vulnerable Nigerians.
He proposed the use of vouchers that would allow vulnerable households and commercial transport operators to purchase petrol at reduced prices, with the government redeeming the vouchers.
Ekpo also suggested that part of the resources generated from subsidy removal could be transferred directly to households rather than being distributed entirely through government budgets.
Similarly, economist Professor Adeola Adenikinju said production subsidy was preferable in principle to consumption subsidy but warned that Nigeria’s history of vested interests could undermine such an arrangement.
He said special interests could hijack a production subsidy programme, making it difficult for the government to terminate the intervention once it became entrenched.
Adenikinju also argued that Nigerians needed clearer evidence of how the gains from subsidy removal were being utilised. He advocated investing the savings in a specialised fund for clearly identifiable projects in roads, railways, education and healthcare.
