Make The Barrel Work For Nigeria: Why Atiku’s AERP Is Making The Tinubu Government Uncomfortable
By Alex Ter Adum, PhD
Nigeria cannot continue to be an oil-rich country whose citizens pay some of Africa’s highest energy costs
Since Atiku Abubakar unveiled his proposal to fundamentally reform Nigeria’s petroleum subsidy architecture – from subsidising imported consumption to supporting domestic refining and production – the government’s defenders have attempted to reduce the debate to one simplistic question:
“Is subsidy good or bad?”
That is the wrong question.
The real question is much more fundamental:
How does Nigeria use its enormous petroleum endowment to lower the cost of energy, stimulate domestic production, retain more petroleum value within the Nigerian economy and ultimately improve the purchasing power and living standards of Nigerians?
That is the debate the country should be having.
And it is precisely why the Atiku Economic Recovery Plan (AERP) deserves serious examination rather than political dismissal.
NIGERIA HAS THE OIL. WHY DOESN’T THE OIL WORK FOR NIGERIANS?
Nigeria is Africa’s largest oil-producing country and possesses one of the continent’s most significant petroleum resource endowments.
Yet Nigerians continue to face extraordinarily high energy costs, with fuel prices feeding directly into transportation, food production, manufacturing, logistics and virtually every component of household expenditure.
That contradiction should disturb every serious policymaker:
How can a country blessed with enormous petroleum resources make energy so expensive for its own citizens?
The answer cannot simply be that “the market determines the price.”
Markets operate within policy choices.
Oil-producing countries make choices about taxation, royalties, crude allocation, refining, domestic supply obligations, strategic reserves, energy subsidies, infrastructure, exchange rates and the extent to which domestic consumers should benefit from the country’s natural-resource advantage.
Nigeria must therefore ask a much more important question:
How do we turn the barrel from merely an export commodity into an engine of domestic prosperity?
FIRST, FIX THE ECONOMICS OF THE BARREL
Nigeria has another structural problem that cannot be ignored: our crude production costs are about the highest globally.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has reported Nigerian upstream production costs in the region of $25–$40 per barrel, approximately ₦37,500–₦60,000 per barrel at an illustrative exchange rate of ₦1,500/$.
NUPRC has itself identified cost reduction as a strategic priority, including an ambition to push average production costs toward $20 per barrel, or approximately ₦30,000 per barrel.
This matters enormously.
If another oil producer can extract a barrel for $10 (₦15,000), while Nigeria spends $40 (₦60,000), the difference is not an academic statistic.
It is money that disappears before the barrel can generate its full fiscal and economic value.
Nigeria therefore needs two simultaneous reforms:
Produce the barrel more cheaply – and make the barrel generate more value after production.
Increasing production without fixing production economics will not deliver the prosperity Nigerians expect.
BUT WHAT HAPPENS TO THE BARREL AFTER IT LEAVES THE GROUND?
This is where the AERP argument becomes particularly important.
Nigeria has historically exported crude, imported refined petroleum products and exposed its citizens to international price movements, foreign-exchange pressures and the inefficiencies of an import-dependent downstream system.
The strategic alternative is obvious:
Why shouldn’t more of the value of Nigeria’s crude be captured inside Nigeria?
Why should Nigeria export crude, pay for international freight and refining elsewhere, find scarce foreign exchange to import the finished product, and then sell that product to Nigerian consumers at prices that feed directly into the country’s cost-of-living crisis?
Domestic refining changes that equation.
The refinery creates economic activity inside Nigeria. Workers are employed. Logistics providers earn revenue. Taxes are generated. Industrial inputs are produced. Foreign-exchange requirements for imported petroleum products can be reduced. And the country captures the refining margin rather than exporting that economic opportunity.
That is the economic logic behind “subsidy follows the barrel.”
WHAT “SUBSIDY FOLLOWS THE BARREL” REALLY MEANS
The AERP proposition should not be misrepresented as a return to an unlimited, opaque petrol subsidy.
The concept is fundamentally different.
Instead of subsidising an imported finished product after it has already been purchased internationally, government can support the domestic production input—crude feedstock supplied to qualifying Nigerian refineries under transparent, predetermined and verifiable conditions.
In other words:
The subsidy follows the barrel into the refinery, not the litre into the consumer’s vehicle.
That distinction is critical.
The AERP design mechanism would be:
- Capped, so government exposure cannot become unlimited;
- Transparent, with published pricing and allocation rules;
- Temporary, rather than an indefinite entitlement;
- Performance-based, tied to verified crude intake;
- Production-linked, requiring actual refined output;
- Domestic-market-linked, requiring verifiable local deliveries;
- Auditable, with independent measurement and reconciliation; and
- Competitive, so inefficient refineries cannot permanently hide behind government support.
The objective is not to enrich refiners.
The objective is to make Nigerian crude work harder for Nigerians.
CONSIDER THE NUMBERS
Nigeria currently produces roughly 1.5 million barrels of crude per day.
Suppose approximately 450,000 barrels per day are made available to domestic refineries under a structured domestic crude-supply arrangement.
Using the 2026 budget benchmark of approximately $64.85 per barrel, that is about ₦97,275 per barrel at ₦1,500/$.
If international crude were trading at approximately $105 per barrel, that would be about ₦157,500 per barrel.
The nominal difference is therefore approximately $40.15 per barrel, or about ₦60,225 per barrel.
Across 450,000 barrels per day, that represents approximately $18.1 million per day, or about ₦27.1 billion per day, in gross differential value.
But here is where the political argument often becomes misleading.
That entire figure should not automatically be described as “money lost by government.”
Why?
Because the policy is exchanging part of the potential immediate export value of crude for domestic economic activity.
The country receives something in return:
refining capacity, employment, domestic industrial activity, tax revenues, reduced petroleum-import requirements, lower foreign-exchange demand, greater energy security and potentially lower downstream prices.
The proper economic question therefore is not:
“How much did government supposedly give away?”
It is:
“What is the total economic return to Nigeria from allocating part of the crude domestically rather than exporting every barrel at the highest possible spot price?”
That is a much more sophisticated question.
And that is precisely the question AERP puts on the table.
LEARN FROM AFRICA—WITHOUT COPYING ITS MISTAKES
Other African oil-producing countries have demonstrated that governments can deliberately use petroleum resources to influence domestic energy prices.
Recent comparative data show extraordinarily low petrol prices in some oil-producing countries. For example, reported prices have put Libya at around $0.02 per litre—about ₦30, Algeria around $0.35—about ₦525, Angola around $0.33—about ₦495, and Egypt around $0.47—about ₦705 at ₦1,500/$.
Nigeria, by comparison, has recently been around the $0.96-per-litre range—approximately ₦1,440 per litre on that same exchange-rate basis.
The precise prices move with exchange rates, taxation and market conditions, but the structural comparison is difficult to ignore. Recent African comparisons continue to show Libya, Algeria and Egypt among countries with substantially cheaper fuel.
This does not mean Nigeria should copy Libya’s subsidy regime.
Indeed, Libya provides a warning as much as an example. The IMF estimates Libya’s total energy subsidy burden at about $17 billion in 2024, equivalent to roughly 35% of GDP, when the broader implicit costs of subsidised domestic hydrocarbons and gas are included.
That is clearly not sustainable.
The lesson is therefore not:
“Subsidise everything.”
The lesson is:
“Use petroleum wealth intelligently to achieve energy security and affordability while designing a fiscally sustainable system.”
That is precisely the policy space AERP seeks to occupy.
SO WHY SHOULD NIGERIA’S OIL BE A CURSE?
This is perhaps the most uncomfortable question for the present administration.
Nigeria has the resource.
Nigeria has the population.
Nigeria has the refineries – existing, rehabilitated, modular and increasingly private.
Nigeria has the crude.
Nigeria has the market.
Nigeria has enormous unmet domestic demand.
And Nigeria has millions of young people desperately looking for productive economic opportunities.
Yet Nigerians are confronted with expensive fuel, expensive transportation, expensive food, expensive logistics and a generalised cost-of-living crisis.
At some point, we have to ask:
What exactly is the point of possessing a petroleum endowment if the resource does not translate into a meaningful economic advantage for the citizens who own it?
Petroleum wealth should not merely produce crude exports and government revenue.
It should produce cheaper energy, competitive industries, jobs, infrastructure, investment and purchasing power.
That is what it means to turn a natural-resource endowment into a national blessing.
THE REAL AERP CHALLENGE
The government should not be frightened by the word “subsidy.”
It should interrogate the architecture.
If AERP proposes an inefficient policy, demonstrate the inefficiency.
If the crude-feedstock mechanism would cost more than the economic value it creates, publish the numbers.
If the proposed subsidy cannot be capped, explain why.
If domestic refining cannot deliver competitive prices, demonstrate the cost structure.
If the policy creates opportunities for arbitrage or diversion, show the vulnerability and propose safeguards.
But simply declaring “subsidy is bad” is not economic analysis.
Because Nigeria already makes enormous policy choices about its petroleum resources.
The question is whether those choices are producing the best possible outcome for Nigerians.
MAKE THE BARREL WORK FOR NIGERIA
The ultimate objective should be bigger than merely reducing the price of petrol.
Nigeria should:
Produce crude more efficiently.
Supply domestic refineries competitively.
Refine more crude at home.
Lower the cost of energy.
Reduce dependence on imported petroleum products.
Reduce pressure on foreign exchange.
Create domestic refining and industrial jobs.
Capture more value from every barrel.
Expand the tax base generated by domestic economic activity.
Strengthen energy security.
And ultimately move from exporting crude to exporting refined petroleum products and petrochemicals.
That is not a call to resurrect the old, opaque and potentially wasteful subsidy regime.
It is a proposal to redesign petroleum policy around production, value addition, accountability and national economic benefit.
The debate should therefore not be:
“Is subsidy good or bad?”
The debate should be:
“What petroleum policy gives Nigerians the greatest sustainable economic return from the barrel that belongs to them?”
And there is one question the Tinubu administration cannot escape:
If Nigeria is Africa’s largest oil-producing country, why should its petroleum endowment produce some of the continent’s highest energy costs instead of being deliberately transformed into cheaper energy, greater industrial competitiveness and a lower cost of living for Nigerians?
That is the question AERP puts before the country.
And that is why the government should answer the economics of AERP, rather than dismissing it with political slogans.
The barrel is Nigeria’s.
The value should work for Nigeria.
And Nigerians should finally feel the benefit.
Alex Ter Adum, PhD
National Coordinator
-AA MOVEMENT FOR A BETTER NIGERIA-
