By Alex Ter Adum
There is something fundamentally wrong with the simplistic economic argument by the incumbent government of President Bola Ahmed Tinubu that “subsidy is bad” whenever the subject is about how to cushion the negative impact of fuel subsidy removal on Nigerians, as though the mere existence of government support for citizens is itself an economic vice.
The more intelligent question the Tinubu administration ought to address it’s mind to is not whether government should ever subsidise. The question is: What is being subsidised, who benefits, how is it structured, how is it financed, and what economic objective does it serve?
Germany provides a useful contemporary example.
As energy prices place pressure on households and businesses, the German government has adopted measures designed to cushion the impact of rising energy costs on its population. The objective is not to pretend that market forces do not exist. Rather, it is to prevent extraordinary price shocks from destroying household purchasing power and economic activity while longer-term structural solutions are pursued.
That is precisely the point that appears to be missing from Nigeria’s current economic conversation under the Bola Ahmed Tinubu administration.
If Germany can intervene to cushion the impact of energy costs on its citizens without abandoning its commitment to market economics, why should Nigerians be told that every form of subsidy is inherently bad?
The issue, therefore, is not subsidy versus no subsidy.
The issue is intelligent subsidy reform versus poorly designed subsidy. That is the trajectory many nations across the world today are persuing.
This distinction lies at the heart of the Atiku Economic Recovery Plan (AERP) subsidy reform programme.
Atiku Abubakar’s proposal does not simply seek to return Nigeria to the old system in which government subsidised imported petroleum products with little transparency and enormous opportunities for arbitrage, smuggling and corruption.
The AERP proposes a fundamental redesign.
Instead of subsidising the imported litre of petrol, support would follow the barrel of Nigerian crude into domestic refineries.
In other words, government support would be linked to domestic production and refining rather than perpetual dependence on imported petroleum products.
This is a fundamentally different proposition.
Under such an arrangement, eligible domestic refineries could receive crude feedstock under a transparent and predetermined pricing mechanism, subject to clearly defined conditions relating to production, verified refinery intake, domestic supply, pricing and volume.
The subsidy would therefore not simply be a blank cheque to consumers, traders or importers.
It would be a production-linked intervention designed to make domestic refining more competitive, preserve value within Nigeria, reduce pressure on foreign exchange, create jobs, expand the domestic industrial base and ultimately lower the cost of refined petroleum products.
That is why Atiku’s argument deserves to be understood on its own terms rather than reduced to the old argument about petrol subsidy.
His proposition is essentially this:
If government must provide support, let the support follow the barrel into Nigerian refineries, not the imported litre into the Nigerian market.
That distinction matters enormously.
When crude is refined domestically, a greater portion of the economic value chain remains within Nigeria. Refinery workers are employed. Transportation and logistics businesses participate. Local contractors and service providers benefit. Government collects taxes and royalties across a wider domestic economic ecosystem. Foreign-exchange demand associated with importing refined products can be reduced.
Most importantly, Nigeria begins to move from being predominantly a crude-oil exporter and refined-product importer towards becoming a significant refining economy.
The objection that “subsidy is bad” therefore avoids the central policy question.
What kind of subsidy is bad?
A subsidy that is opaque, unlimited, import-dependent and vulnerable to fraud can certainly be economically destructive.
But a subsidy that is temporary, targeted, transparent, capped, independently verifiable and tied to domestic production can serve a completely different economic purpose.
Indeed, governments around the world routinely intervene in their economies when extraordinary circumstances threaten citizens’ purchasing power.
The argument is not that Nigeria should blindly copy Germany. Nigeria has different fiscal circumstances, institutional challenges and energy-market structures.
The lesson is simpler and more fundamental:
A responsible government does not stand helplessly before an economic shock and tell citizens that the market must take its course.
Government must sometimes intervene to cushion the immediate impact while simultaneously addressing the structural causes of the problem.
That is precisely why the Bola Ahmed Tinubu administration should be willing to examine Atiku’s AERP proposal without ideological or partisan prejudice.
If the administration believes that the AERP requires modification, let it demonstrate where the proposal fail. If it believes the proposed mechanism is fiscally unsustainable, let it present a superior mechanism for protecting Nigerians from energy-price shocks while expanding domestic refining.
But simply declaring that “subsidy is bad” does not constitute an economic policy.
The real test of economic leadership is whether government can protect citizens today while building a stronger economy for tomorrow.
Nigeria is already witnessing the consequences of allowing energy prices to transmit their full shock into an economy where wages and household incomes have not risen proportionately. Transportation costs rise. Food prices rise. Production costs rise. Businesses struggle. Household purchasing power falls.
The poor bear the greatest burden.
This is why the subsidy debate must move beyond slogans.
Nigeria needs a framework in which intervention is targeted rather than wasteful, temporary rather than indefinite, transparent rather than opaque, production-oriented rather than import-dependent, and measurable rather than open-ended.
That is the logic behind the AERP’s proposed subsidy reform.
It is also why Germany’s approach to cushioning energy costs should provoke serious reflection in Nigeria.
The question is not whether government should ever support its citizens.
The question is whether government has the imagination to design that support intelligently.
Atiku Abubakar is asking the Tinubu administration to do precisely that: borrow the useful principle of cushioning citizens from energy shocks, but redesign the mechanism around Nigeria’s own realities, particularly the emergence of substantial domestic refining capacity. He has even urged the government to strip his name off it and own it.
Nigeria does not need a return to an inefficient subsidy regime.
Neither does it need a dogmatic policy that treats every form of subsidy as economic heresy.
What Nigeria needs is smart subsidy reform.
A system where support is tied to production, verified, capped, transparent and ultimately designed to make subsidy unnecessary as domestic refining becomes competitive.
That is the real policy conversation.
The choice before Nigeria is not simply subsidy or no subsidy.
It is between intelligent economic intervention that protects Nigerians while transforming the productive structure of the economy, and an ideological refusal to intervene while households and businesses absorb the full force of energy-price shocks.
Germany’s experience reminds us that responsible governments can cushion their people from extraordinary economic pressures.
Atiku’s AERP offers Nigeria a proposal for doing so differently: move the subsidy from the imported product to the domestic production system; make it transparent, targeted and fiscally controlled; and use the intervention to build an industry capable of standing on its own.
That is not a defence of the old subsidy regime.
It is a case for reforming subsidy so that it works for Nigeria.
Alex Ter Adum, PhD
DDG THE NARRATIVE FORCE
