Former Fidelity Bank chairman, Mustafa Chike-Obi, has criticised the proposal by former Vice-President Atiku Abubakar to restore petrol subsidy, describing the idea as naive and warning that it could result in a substantial loss of Nigeria’s foreign exchange earnings.
Chike-Obi, who is also the pioneer Chief Executive Officer of the Asset Management Corporation of Nigeria (AMCON), spoke on Thursday during the Policy Without Politics podcast, which he co-hosts with Ken Ikpe, Chief Executive Officer of Graviti Hill Limited.
Atiku, the presidential candidate of the African Democratic Congress (ADC), had announced on August 19 that he would reinstate petrol subsidy if elected president in 2027.
The former vice-president had also accused President Bola Tinubu’s administration of failing to account for the funds it claimed to have saved following the removal of the subsidy.
But Chike-Obi rejected the proposal, arguing that subsidising petroleum products would amount to selling Nigeria’s crude oil below its potential market value.
He said if Nigeria could sell crude at $100 per barrel but chose to supply it to domestic operators at $50, the country would effectively be giving away half of the potential foreign exchange value of the commodity.
“First of all, that’s crude. This is something that people say that drives me crazy. If you can sell crude at $100 a barrel as a country, and you say your priority is to sell it to somebody at $50, you have spent half of your national wealth in terms of foreign exchange on that product,” he said.
According to him, the proposed subsidy would also create opportunities for profiteering and cross-border smuggling because subsidised petrol would be cheaper in Nigeria than in neighbouring markets.
He argued that the government would consequently have to establish an extensive regulatory structure to monitor suppliers, enforce prices and prevent the diversion of subsidised petrol.
“You have to monitor the factory. You have to make sure it’s not exported or smuggled abroad. You have to make sure that there’s price controls,” he said.
Chike-Obi added that the need for government to constantly police the market would undermine the efficiency of the subsidy arrangement.
“You have a whole machinery of government controlling, policing something that the market doesn’t control. So it’s extremely naive to think that that would work,” he said.
He acknowledged that the previous arrangement operated through the Nigerian National Petroleum Company Limited, which purchased petrol and sold it at a fixed price, but argued that the model was not sustainable.
“Again, that’s more efficient but doesn’t work either,” he said.
Chike-Obi proposes targeted assistance
Rather than returning to a universal petrol subsidy, Chike-Obi recommended a targeted intervention for low-income Nigerians.
He suggested that the government could introduce an income-based eligibility system and issue vouchers to Nigerians who fall below a predetermined income threshold.
The vouchers, he said, would allow poorer Nigerians to receive assistance while limiting the cost of government intervention compared with a blanket subsidy.
He conceded, however, that the voucher system would not be completely efficient.
“A voucher is better, but it’s still not totally efficient,” he said.
Ikpe, who also spoke during the podcast, backed the continuation of the current policy direction.
He argued that government policies should be subjected to periodic reviews and improved where necessary rather than being abandoned after a short period.
Ikpe maintained that strengthening the current system would be preferable to reverting to the petrol subsidy regime proposed by Atiku.
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