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Kperogi and economics of Atiku’s subsidy dream
By Kayode Adebiyi
Farooq Kperogi is right about one thing: Atiku Abubakar’s obsession with President Bola Ahmed Tinubu’s old forfeiture controversy and the Chicago State University saga has yielded diminishing political returns. Nigerians have heard these arguments repeatedly, and neither controversy addresses the economic reality confronting households today. But Kperogi makes a serious analytical mistake when he moves from that legitimate observation to treating Atiku’s renewed promise to restore petrol subsidy as a credible economic alternative.
It is not. Atiku may have discovered a potent campaign message but he has not discovered a solution to Nigeria’s economic problems. In fact, his proposal risks resurrecting one of the very structural problems Nigeria has spent years trying to escape. The central deception in the subsidy debate is contained in the simple question: “Where is the money saved from subsidy removal?” It turns my tummy when I hear even very highly educated folks parrot this silly question.
That question sounds compelling politically but betrays a fundamental misunderstanding of how the old subsidy system operated. There was no giant pot of money sitting in a government account, labelled “petrol subsidy”, which suddenly became available when Tinubu removed the subsidy.
The subsidy was a fiscal burden. Nigeria was effectively paying the difference between the economic cost of supplying petrol and the artificially low price at which it was sold. When the government could not transparently fund that obligation through the budget, the burden was shifted elsewhere, including onto NNPC and ultimately against oil revenues.
The IMF documented precisely this problem: when subsidy payments were not provided for in the budget, the costs were borne by NNPC and deducted from oil revenues accruing to the Federation Account. That is why money to be shared between the FG and sub-nationals were abysmally low every month under the Buhari government and many states cannot meet their basic obligations.