Presidency Warns Atiku’s Subsidy Plan Could Trigger Fuel Smuggling

The Special Adviser to President Bola Tinubu on Media and Public Communication, Sunday Dare, has criticised former Vice-President Atiku Abubakar’s proposal to subsidise crude oil supplied to local refineries, warning that the policy could reduce government revenue and distort the domestic market.

Dare made the remarks on Wednesday in a post on his X handle while reacting to Atiku’s renewed promise to restore fuel subsidy if elected president in 2027.

Atiku, the presidential candidate of the African Democratic Congress, had insisted that his position on subsidy had not changed, after his media aide, Paul Ibe, suggested that the proposed intervention would eventually be phased out as the economy recovered.

Dare argued that selling federation crude to local refineries at preferential prices would create an “immediate fiscal hole” in the Federation Account and reduce allocations to the federal, state and local governments.

“The Arithmetic Flaw in ‘Subsidizing the Barrel’

“Atiku’s proposition to sell crude to local refineries at ‘preferential prices’ sounds attractive until you look at the fiscal math:

“Who Pays the Bill? Selling federation crude below market price creates an immediate fiscal hole in the Federation Account, directly slashing allocations to federal, state, and local governments for schools, hospitals, and security.

“Distorting the Domestic Market: Preferential crude allocations risk creating artificial monopolies, destabilising smaller indigenous modular refiners, and violating the clear deregulatory provisions of the Petroleum Industry Act (PIA).

“The Return of Smuggling: Any regime that creates a wide gap between Nigerian pump prices and neighbouring West African markets guarantees a return of cross-border fuel arbitrage, no matter how many ‘auditors’ are promised.

“This idea is an economic safari. Applying painkillers to a festering wound.”

Atiku had on Tuesday reiterated his commitment to restoring fuel subsidy if elected, saying Nigeria was wealthy enough to cater to the welfare of its citizens.

“Earlier, one of my press aides contradicted me in a policy statement as far as subsidy is concerned.

“I want to repeat categorically that when I said I would return to subsidy, I will! Nigeria is rich enough to look after the welfare of its citizens. Let it be clearly stated that he was not speaking on my own authority,” Atiku said.

Ibe had earlier explained that Atiku’s proposed subsidy would be linked to crude oil production and domestic refining, with crude supplied to local refiners at discounted prices.

“The crude oil will be sold at a discounted price, subsidised to refiners, and that will enable refiners to be able to produce fuel and diesel at a cheap cost. And when they produce cheaply, they will sell at the real pump price,” the aide said.

However, Dare said preferential crude allocations could create artificial monopolies and undermine smaller indigenous modular refineries while contravening the deregulatory framework of the Petroleum Industry Act.

He further warned that a disparity between fuel prices in Nigeria and neighbouring West African countries could encourage cross-border fuel arbitrage and revive smuggling.

The dispute comes amid the continued debate over the removal of petrol subsidy, which President Tinubu announced during his inauguration on May 29, 2023.

While the Tinubu administration has maintained that subsidy removal was necessary to strengthen government finances, Atiku has argued that the policy has worsened the cost of living for Nigerians.

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