The Centre for the Promotion of Private Enterprise has warned that a return to universal petrol subsidy could cost the government about N19.16tn annually. The think tank said such a huge expenditure would impose an enormous opportunity cost on Nigeria’s already constrained public finances.

The CPPE said an annual subsidy bill approaching N20tn would compete directly with funding for infrastructure, education, healthcare, security, agriculture and social protection, while potentially widening the fiscal deficit and increasing borrowing and debt-service pressures.

The Chief Executive Officer of the CPPE, Dr Muda Yusuf, stated this in a policy brief on Sunday.

Yusuf calculated the estimated N19.16tn annual exposure based on petrol consumption of 50 million litres per day and an indicative subsidy requirement of N1,050 per litre. This translates to about N52.5bn daily and N1.575tn monthly.

He noted that the actual cost could vary depending on consumption levels, crude oil prices, exchange rates, refining or landing costs, and the regulated pump price.

Consumption could also rise under a subsidy regime as price differentials create renewed incentives for arbitrage and cross-border diversion.

Yusuf warned that restoring the old subsidy regime could therefore replace the current energy-price challenge with a much larger fiscal, debt, foreign-exchange and investment problem.

He said higher government borrowing could crowd out private-sector credit, sustain high interest rates and weaken investment, productivity, job creation and economic growth.

Rather than returning to universal petrol subsidy, the CPPE urged the government to ensure that the fiscal gains from subsidy removal are translated into visible improvements in citizens’ welfare.

“Citizens must see tangible benefits through improved public transportation, electricity, healthcare, education, food security, infrastructure and social protection,” Yusuf stated.

He said the additional revenues available to the three tiers of government should be deployed to reduce the structural costs created by higher petrol prices, including expanded mass transit, improved electricity supply, stronger agricultural production and logistics, targeted social protection, affordable healthcare and education, and support for productive enterprises, particularly MSMEs.

The CPPE acknowledged that the escalation in petrol prices had placed severe pressure on households and businesses, increasing transportation, logistics and production costs, weakening purchasing power and worsening competitiveness challenges.

However, Yusuf argued that the solution should be targeted relief rather than a return to the pre-reform universal subsidy system. He also stressed the need to distinguish subsidy removal from the more recent increase in global energy prices.

According to him, petrol sold for about N774–N800 per litre before the latest global energy shock, but subsequently rose above N1,300 per litre as international energy prices increased amid the Middle East crisis.

He said it would therefore be incorrect to attribute the entire increase to subsidy removal, describing the two developments as distinct issues requiring different policy responses.

The CPPE maintained that subsidy removal had improved the commercial viability of domestic refining and strengthened revenues available to the Federal, state and local governments.

Yusuf said the reform should therefore be preserved while the government aggressively mitigates its social and economic costs. He also called for greater transparency and accountability in the utilisation of the additional resources accruing to the three tiers of government.

“The appropriate policy direction is to preserve the downstream petroleum reforms while aggressively mitigating their social and economic costs,” he said.

The CPPE said the subsidy debate should consequently move beyond whether the petrol subsidy should be restored and focus instead on how Nigeria can convert the fiscal gains from reform into lower structural costs, stronger domestic production, improved competitiveness, greater energy security and measurable improvements in citizens’ welfare.