Why Nigeria Cannot Afford the Subsidy Illusion: A Factual Rebuttal to the “So What If We Lose N15 Trillion?” Argument
By Abiodun Bolade (AbbeyGovernor)
10/11/20264 min read
Abbati Bako’s piece romanticizes fuel subsidies as pure democratic fulfillment of “the people’s will,” treating government as an unlimited dispenser of free resources*. The logic is seductive but economically and institutionally false. Governments are not businesses, yet they face hard budget constraints, opportunity costs, and the reality that oil money is not free or fully owned by Nigerian voters. Persistent blanket subsidies have repeatedly delivered corruption, scarcity, debt, and underinvestment rather than prosperity.
Nigeria Does Not Own or Control All the Oil It Produces
Nigeria produces roughly 1.5–1.8 million barrels per day (including condensates), with recent figures around 1.56–1.57 million barrels of crude and peaks near 1.8 million barrels total. This is modest for a population exceeding 200 million. By comparison, the United States produces around 13.8–14 million barrels per day for roughly 330 million people and is a net exporter.
Critically, *not all Nigerian output is freely available to the government*. Joint ventures and production-sharing contracts with international oil companies (Shell, ExxonMobil, Chevron, TotalEnergies, etc.) allocate volumes according to equity, cost recovery, royalties, and profit oil. *Finance Minister Taiwo Oyedele has stated that after these shares, costs, royalties, and existing commitments, Nigeria has less than 700,000 barrels of “free” crude available for domestic allocation*. This is why the country cannot fully supply the Dangote refinery’s ~650–700,000 barrels-per-day requirement without imports—even while producing ~1.8 million barrels daily. Older “cash for crude” style arrangements and borrowing against future production further constrained volumes.
Production costs compound the problem. Nigerian upstream costs average $25–40+ per barrel (sometimes cited higher), far above Saudi Arabia’s ~$10 and competitive with or above many U.S. shale operations. High costs stem from insecurity, theft, aging infrastructure, and operational inefficiencies. OPEC (and market forces) set global prices; Nigeria is a price-taker, not a setter.
The Fiscal Arithmetic Is Not Optional
The claim of “losing” N15 trillion annually ignores that the old subsidy regime required borrowing or diverting scarce revenue while fuel was still imported and smuggled*. Official figures show the 2023 removal generated approximately N15.8 trillion in additional federation resources between June 2023 and December 2025. These were shared among federal, state, and local governments, contributing to sharp rises in FAAC allocations (states and local governments received substantial additional sums). States that once struggled with salaries now have more room for projects—though governance quality determines whether citizens feel the benefit.
Continuing the subsidy would have meant financing it through more debt, inflation, or cuts elsewhere. Governments that “lose money” indefinitely eventually cannot pay salaries, service debt, fund security, or build infrastructure. Inflation, currency pressure, and higher borrowing costs hit the poor hardest. The informal market poll cited does not capture the full preference set: voters also want functioning hospitals, schools, roads, reliable power, and security. *Blanket fuel subsidies crowded out those priorities and were highly regressive—benefiting higher consumers, smugglers, and middlemen more than the poorest households.
Flawed International Comparisons
• *United States*: Defense spending occurs in a massive, diversified, high-productivity economy that issues the world’s reserve currency (the petrodollar legacy is real, reinforced by deep financial markets and military power). *The U.S. is also the world’s largest oil producer. TARP (the 2008–09 crisis response) was a temporary financial-system intervention, not an open-ended consumer subsidy*.
The U.S. does not run permanent, open-ended fuel price caps that bankrupt the treasury.
• UK NHS and European energy support: These are funded by broad tax bases in high-income economies.
Post-2022 energy measures in Germany and elsewhere were temporary, targeted responses to a geopolitical shock, financed by strong fiscal capacity—not permanent open-ended price controls. Public debate continues over sustainability (including voices skeptical of unlimited free provision). France’s recent fiscal and political strains, and reduced leverage over former African partners (AES countries), illustrate the limits of over-reliance on external rents or transfers.
Saudi Arabia and Gulf producers: These have far higher oil production relative to citizen populations, lower production costs, and sovereign wealth buffers. Per-capita hydrocarbon endowment and fiscal space are orders of magnitude larger. Even they have pursued gradual price reforms and citizen-account cash transfers rather than pure open-ended price caps. Nigeria’s per-capita oil production and revenue are much lower.
Africa’s push for greater UN representation and resource sovereignty is legitimate*. It does not, however, change the domestic arithmetic of production costs, contract shares, theft, and underinvestment.
Democracy Requires Sustainability, Not Permanent Populism
Democracy means government of, by, and for the people—including future generations. It does not require leaders to bankrupt the state because a majority prefers lower prices today. Repeated subsidy episodes (partial removals under Babangida, the 2012 episode, and earlier efforts) produced temporary relief followed by inflation, scarcity, corruption, and political backlash precisely because the underlying fiscal and supply problems were unresolved. Voters ultimately judge leaders on whether life improves: jobs, food prices, security, and opportunity. A collapsing currency, rising debt, and underfunded services erode those gains.
The “gains” of cheap fuel (cheaper transport, farm power, factory generators) are real in the short run but come with massive leakages and opportunity costs*. Targeted support for the vulnerable, investment in local refining (progress at Dangote is relevant), security to raise production, cost reduction, and broader diversification deliver more durable benefits. Saving or reallocating the fiscal space allows states and the federal government to fund infrastructure, wages, and security without perpetual borrowing for consumption.
Conclusion
Oil belongs to Nigerians in a legal and political sense, but realizing value requires efficient production, honest contracts, and prudent fiscal management—not treating the government as an unlimited ATM. **The N15 trillion figure represents real resources that could fund productive investment rather than leakage and smuggling*. Leaders who ignore these constraints risk the very legitimacy they claim to protect. *Sustainable policies that grow production, refine locally, reduce costs, and deliver targeted relief serve the long-term interests of voters far better than repeating the cycle of subsidy, crisis, and disappointment*.
Abiodun Bolade Bsc Msc Econs(uk)
Special Assistant to Dr Sunday Dare,CON
www.tinubunewmedia.com
