Fuel subsidy returns: What changed since 2023?
From Europe’s energy crisis to Nigeria’s subsidy debate, the challenge is to make energy affordable without sacrificing fiscal sustainability and public accountability.
John Onyeukwu | Policy & Reform Column, Business a.m. | Oct 5-11, 2026 |pullout attached|
When energy prices surged during the global energy crisis of 2022, governments faced a familiar dilemma: allow higher prices to pass through to consumers or intervene to cushion the shock. Many chose intervention through price caps, tax reductions, direct payments and energy subsidies. The measures provided relief, but they also exposed a difficult question: who benefits from public support, how much does it cost, and how long can it last?
The International Energy Agency estimated that governments mobilised close to US$900 billion in measures to protect consumers during the energy crisis, yet only about a quarter was targeted at low-income households and the industries most affected. Much of the support went broadly to consumers.
The International Monetary Fund estimated explicit global fossil-fuel subsidies at about US$725 billion in 2024. Its analysis of household data from 87 countries found that the wealthiest half captured nearly three-quarters of explicit fuel subsidies, while the poorest 20 per cent received only about eight cents of every dollar spent. The evidence is global rather than Nigeria-specific, but the lesson is relevant: a subsidy does not automatically mean that public money reaches those who need it most.
Nigeria’s renewed subsidy debate belongs in this wider context. The question is not simply whether government should intervene in the energy market. Governments do so under different circumstances. The more important questions are what the intervention is intended to achieve, who benefits, what it costs, how it affects investment and productivity, and what safeguards prevent abuse.
Nigeria has travelled this road before. What has changed since 2023 is the experience of subsidy removal, the economic pressure it created, and the growing demand for evidence that the fiscal space generated by reform has translated into public value.
On 29 May 2023, President Bola Tinubu announced that petrol subsidy would no longer continue. The policy reflected a longstanding concern that subsidising petrol was placing substantial pressure on public finances while creating opportunities for arbitrage, diversion and weak accountability.
The debate in 2023 was not simply between candidates who supported reform and those who opposed it. Peter Obi supported subsidy removal but argued for orderly implementation, transparency and productive use of the resources released. Atiku Abubakar also supported removal while arguing that palliatives should precede implementation. Tinubu opted for immediate removal on assuming office.
Three years later, the policy debate has changed because Nigerians can now examine the consequences. The relevant question is no longer simply whether the old system was sustainable. It is whether reform has delivered a credible combination of fiscal improvement, lower production costs and improved household welfare.
The emerging position of Peter Obi and Rabiu Kwankwaso, now running on the same NDC ticket, reflects this changed debate. Recent statements from both have pointed towards government intervention to make fuel more affordable, while presenting it as different from simply recreating the previous subsidy regime. Kwankwaso has linked the approach to domestic refining, while Obi has spoken of restoring subsidy after addressing corruption.
The important distinction is between restoring affordability and restoring the old subsidy system. The first is an objective; the second is only one possible instrument.
Government could support domestic production, reduce particular costs in the supply chain, provide targeted assistance to vulnerable consumers or combine several measures. Each would have different fiscal and distributional consequences.
Domestic refining could reduce dependence on imported finished products and strengthen supply security, but local refining alone does not guarantee cheaper petrol. Crude costs, financing, processing efficiency, transportation, distribution, taxes and competition would still affect the final price.
The emerging NDC position therefore needs to move beyond the language of doing subsidy differently. Any future proposal would need to specify what government would support, who would benefit, how much it would cost, where the money would come from and what conditions would determine whether the intervention continues.
That is particularly important because the global experience shows that universal price support can disproportionately benefit higher-consuming and higher-income households. Targeted intervention can be more progressive, but only if government has credible systems for identifying beneficiaries and auditing payments. Structural measures that reduce the underlying cost of production may be more durable, but they take longer to deliver results.
A temporary intervention could therefore coexist with structural reform. But temporary relief must not quietly become a permanent and opaque fiscal commitment.
Atiku Abubakar has also advocated intervention to reduce petrol prices, but his stated approach has focused on supporting domestic production rather than simply reviving the former import-based subsidy arrangement.
His camp has described a model involving a capped, independently audited intervention in domestic refining, with conditions for eventual exit.
That approach and the NDC’s emerging position share an emphasis on government intervention to improve affordability and strengthen domestic supply. They should not, however, be treated as identical. Their specific instruments, funding arrangements and safeguards require separate examination.
The central issue is whether support provided somewhere in the production chain actually reaches consumers. If government subsidises production but retail prices remain high, the intervention has not achieved its stated objective. If government caps consumer prices without controlling its fiscal exposure, it risks recreating the problem that reform was intended to solve.
The minimum standard should therefore be clear: define the intervention, establish a fiscal ceiling, disclose its funding source, independently verify payments and volumes, demonstrate pass-through to consumers, and establish conditions for review or exit.
The subsidy debate must also examine the record of the Tinubu administration. The government has defended subsidy removal as necessary to improve public finances and redirect resources towards development. The appropriate test is not simply whether the reform generated additional resources. It is what happened to those resources afterwards.
This requires distinguishing subsidy savings from other increases in government revenue, borrowing and expenditure. A rise in Federation Account allocations does not automatically mean that the entire increase came from subsidy removal. Similarly, higher government spending does not by itself demonstrate that reform failed.
The proper accountability chain is straightforward: from resources released to how they are allocated, expended, level of implementation, outcomes and benefits derived from it by citizens Each link requires evidence. How much fiscal space was created? How was it distributed? What was spent? What was delivered? And what changed for citizens?
Fiscal improvement and household welfare are not the same thing. Government can improve its fiscal position while families continue to face high transport, food and energy costs. Fiscal sustainability matters because it creates room for public investment, but its ultimate value depends on whether that investment improves productivity, services and incomes.
Removing a subsidy is a fiscal decision. Converting the resulting fiscal space into development is a governance responsibility. Nigeria’s longer-term objective should be to reduce its vulnerability to energy price shocks rather than alternate indefinitely between subsidy removal and subsidy restoration.
Fuel costs affect much more than what consumers pay at filling stations. They influence food distribution, transportation, manufacturing, services and the operating costs of businesses that depend on generators. High energy costs therefore function as an economy-wide productivity tax.
An effective affordability strategy must consequently extend beyond petrol. It should address electricity reliability, transport and logistics infrastructure, financing costs, market competition and the efficiency of supply chains. Domestic refining can contribute, but only if investment is commercially viable, competition is protected and governance arrangements prevent public support from becoming another channel for rent extraction.
The objective should be a different economic cycle: lower production costs improve competitiveness; greater productivity supports jobs and incomes; stronger economic activity expands the revenue base; and stronger public finances create greater capacity for investment in infrastructure and services. That is more durable than permanently keeping one price below its underlying economic cost.
Nigeria’s subsidy debate is ultimately a debate about the credibility of public institutions. The old system raised questions about fiscal exposure, transparency and who actually benefited. The post-2023 system has raised different questions about how the costs of reform have been distributed and whether the fiscal benefits have translated into visible improvements.
Neither experience should be reduced to a slogan. The existence of past abuses does not mean every future intervention must fail. Equally, a promise to eliminate corruption does not establish that a new subsidy arrangement will be transparent or sustainable.
For Obi and Kwankwaso, the task is to explain how their proposed intervention would work and how they would prevent the abuses associated with the old system. For Atiku, it is to provide sufficient detail to assess the fiscal and operational implications of his production-focused proposal. For the incumbent government, it is to account convincingly for the resources released by reform and demonstrate what those resources have delivered.
Ultimately, Nigerians should not have to choose between unaffordable energy and an opaque subsidy system. Nor should subsidy removal or restoration become an end in itself.
The real test is whether policy makes energy more affordable, supports productive investment, protects vulnerable households and remains fiscally sustainable. The global experience shows that energy intervention can provide relief, but its design determines who benefits and whether the cost can be sustained. Nigeria’s experience adds another lesson: policy design cannot be separated from institutional capacity and public accountability.
The question, therefore, is larger than whether subsidy should return. It is whether Nigeria can build a system that makes energy more affordable while ensuring that every kobo of public support is transparently justified, properly managed and demonstrably connected to better economic outcomes. Affordability must be the objective, fiscal responsibility the constraint, and transparency the condition for public intervention.
