The Federal Government has dismissed a proposal by former Vice President Atiku Abubakar. Atiku wanted crude oil supplied to local refineries at subsidised prices. The government said no. It cited historical failures during previous trials.
Nigeria has subsidised petroleum products for decades. The petrol subsidy regime cost trillions of naira and was riddled with fraud. The government ended it in 2023, triggering a sharp rise in pump prices and transport costs. The Dangote refinery has revived the debate. Local refiners want cheap feedstock. The government wants revenue.
The proposal has a surface logic. If local refineries get crude below market price, they can sell refined products cheaper. That would lower pump prices and ease inflation. But the mechanics are messy. Crude is priced in dollars. The government would have to absorb the difference, either by forgoing revenue or paying a subsidy directly. Both options cost money the treasury does not have.
The historical precedent is discouraging. Previous attempts to subsidise crude supply to refineries, including the old Port Harcourt and Warri refineries, produced little refining and lots of leakage. The subsidy became a patronage channel. The refineries ran below capacity. The money disappeared. The government’s dismissal reflects that memory.
There is also a structural problem. Nigeria’s local refineries, including Dangote, need reliable crude supply and functioning infrastructure. Subsidising the crude does not fix pipelines, storage or distribution. It treats a symptom, not the cause. The government’s rejection is defensible on fiscal grounds but avoids the harder question: how to make local refining work without subsidy.
Winners: The Federal Government, which avoids a new fiscal burden. The International Monetary Fund and World Bank, which oppose subsidies. Importers of refined products, who keep market share. Losers: Local refiners, who wanted cheaper feedstock. Consumers, who face higher pump prices. Atiku, whose proposal is rejected. Nigerians who hoped for relief at the pump.
Bottom Line: Rejecting a bad subsidy is easy. Fixing the refining sector without one is the hard part.