Special Adviser to President Bola Tinubu on Media and Public Communication, Sunday Dare, has slammed the plan by Atiku Abubakar, the presidential candidate of the African Democratic Congress, to subsidise crude oil for local refineries.
Dare believes this proposal could cause issues in the economy and the market.
He explained that selling crude oil to local refineries at lower prices would cut down government revenue.
Dare shared his thoughts in a post on his X handle on Wednesday. This was in response to Atiku’s promise to restore fuel subsidy if he becomes president in 2027.
He pointed out that the plan to sell crude to local refiners at discounted rates would lead to an “immediate fiscal hole” in the Federation Account.
The Arithmetic Flaw in Subsidizing the Barrel
“Atiku’s idea to sell crude to local refineries at ‘preferential prices’ seems appealing until you examine the financial details:
“Who Pays the Bill? Selling federation crude below market price creates an immediate fiscal hole in the Federation Account. This directly cuts allocations to federal, state, and local governments for schools, hospitals, and security.
“Distorting the Domestic Market: Giving preferential crude allocations could lead to artificial monopolies. This would hurt smaller local refineries and go against the rules set by the Petroleum Industry Act (PIA).
“The Return of Smuggling: Any approach that creates a big price difference between Nigerian fuel prices and those in neighbouring West African countries will lead to more cross-border fuel smuggling. This will happen no matter how many ‘auditors’ are promised.
“This plan is like putting a bandage on a serious wound.”
Dare’s remarks came after Atiku firmly stated he would restore fuel subsidy if elected in 2027.
On Tuesday, Atiku said his stance on subsidy remains unchanged. He also distanced himself from comments made by his media aide, Paul Ibe, who suggested that the subsidy would be gradually removed as the economy improves.
“Earlier, one of my press aides contradicted me on my subsidy policy. I want to clearly state that when I said I would return to subsidy, I mean it! Nigeria is rich enough to care for its citizens. Let me be clear, he was not speaking on my authority,” Atiku said.
Ibe previously explained that Atiku’s subsidy plan would connect to crude oil production and local refining. The plan involves selling crude at a discount to local refineries.
He stated, “The crude oil will be sold at a discounted price to refiners. This will help them produce fuel and diesel at lower costs. When they produce cheaply, they can sell at the real pump price.”
Dare, however, stressed that giving preferential crude allocations could disrupt the local market and create monopolies. He also mentioned that this could lead to a price gap between Nigeria and West African countries, possibly boosting fuel smuggling.
Atiku’s comments have reignited discussions on the fuel subsidy issue. This topic became prominent when Tinubu announced the removal of petrol subsidy during his inauguration on May 29, 2023.
The current administration has defended this policy as necessary for improving public finances. Atiku, on the other hand, argues that removing the subsidy has raised living costs for Nigerians.
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