- IMPI says Atiku Abubakar’s fuel subsidy proposal could weaken investor confidence.
- The group warns that price controls may undermine Nigeria’s petroleum sector reforms.
- IMPI says the policy could trigger fuel shortages, black-market trading and higher transport costs.
The Independent Media and Policy Initiative has warned that former Vice President Atiku Abubakar’s proposal to restore fuel subsidy could discourage investors and create uncertainty in Nigeria’s petroleum sector.
Eko Hot Blog reports that IMPI raised the concern in a policy statement issued in Abuja by its Chairman, Omoniyi Akinsiju, amid renewed debate over Atiku’s proposal to introduce a production-focused fuel subsidy.
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Atiku, in his proposed economic recovery plan, has advocated a shift from consumption subsidy to production subsidy. Under the proposal, local refineries would receive crude oil at discounted prices, with the expectation that the savings would be passed on to consumers through lower petrol prices.
However, IMPI argued that the arrangement could create uncertainty for investors if commercial operators, including the Nigerian National Petroleum Company Limited and private refineries, were required to operate under politically determined pricing arrangements.
Akinsiju said the proposal could send a negative signal to international investors seeking regulatory stability and predictability in Nigeria’s oil and gas sector.
He argued that reintroducing price regulation could undermine the Petroleum Industry Act, which established a commercially driven framework for the downstream petroleum sector.
According to IMPI, the proposed intervention could also create an “illusion of price reduction” because the cost of the subsidy would effectively be transferred from direct government payments to discounted crude oil allocations.
The group further warned that fixed petrol prices could reduce commercial incentives for marketers to distribute products to remote communities, potentially concentrating supplies in major cities.
IMPI also raised concerns that discounted crude allocations could reduce the revenue available to the Federation Account, thereby limiting funds available to federal, state and local governments for infrastructure and social services.
The group warned that a return to price controls could lead to fuel shortages in some areas and encourage black-market trading, potentially increasing transportation costs and worsening food inflation.
The debate comes more than three years after President Bola Tinubu announced the removal of petrol subsidy in May 2023.
The decision triggered a sharp increase in petrol and transportation costs, with the Federal Government maintaining that the reform was necessary to address the fiscal burden created by the subsidy regime.
While some experts believe a production-focused intervention could provide relief to consumers if properly implemented, others have warned about the risks of renewed government intervention and the difficulty of eventually ending such a programme.
IMPI maintained that Nigeria should instead focus on policies capable of increasing productivity, attracting investment and reducing the structural cost of doing business.
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