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CPPE warns against return to petrol subsidy, proposes targeted relief
The Centre for the Promotion of Private Enterprise (CPPE) has cautioned against restoring the petrol subsidy, describing the policy as fiscally unsustainable despite the severe economic pressures caused by rising petrol prices.
The private-sector advocacy group, in a policy brief signed by its Chief Executive Officer, Muda Yusuf, on Sunday, said the recent escalation in petrol prices had increased transportation, logistics and production costs, weakening consumers’ purchasing power.
It added that the recent increase in fuel prices also worsened the competitiveness challenges confronting businesses, particularly micro, small and medium enterprises (MSMEs).
CPPE’s position comes amid renewed calls for a return to fuel subsidy, including a pledge by former Vice-President Atiku Abubakar to restore a targeted petrol subsidy if elected in 2027.
The organisation said the subsidy debate should not be reduced to the issue of pump prices, arguing that it has wider implications for Nigeria’s fiscal sustainability, foreign exchange stability, investment, domestic refining, industrialisation, employment and energy security.
“The central policy question is therefore not whether Nigeria should return to the old subsidy regime, but how to preserve the gains of the reform while reducing its social costs and translating the resulting fiscal space into tangible improvements in citizens’ welfare,” CPPE said.
Subsidy regime
According to the think tank, Nigeria previously spent an estimated $10 billion to $15 billion annually on petroleum-product imports before the subsidy reform.
It said subsidy and under-recovery obligations also consumed significant public resources, constrained remittances to the Federation Account and intensified fiscal pressures.
CPPE said artificially low domestic petrol prices also encouraged arbitrage and cross-border diversion, effectively resulting in Nigerian public resources subsidising fuel consumption outside the country.
“The old regime was therefore not merely a subsidy problem; it was a major fiscal, foreign-exchange and resource-allocation problem,” the think tank said.
Domestic refining
The group said the shift to market-based petrol pricing had improved the commercial viability of domestic refining by creating stronger investment incentives in the sector.
The think tank argued that a competitive domestic refining industry would generate opportunities beyond petrol production, including in diesel, aviation fuel, petrochemicals, fertiliser, plastics, chemicals, logistics, storage and maritime services.
“Domestic refining also conserves foreign exchange through import substitution, creates export opportunities and retains refining, engineering, logistics and technical jobs within the Nigerian economy,” CPPE said.
It urged Nigeria to pursue the transition from dependence on imported petroleum products to becoming “a competitive regional refining and petrochemical hub.”
CPPE acknowledged that subsidy removal had increased revenues available to the federal, state and local governments but said higher government revenues alone could not justify the reform.
“Citizens must see tangible benefits through improved public transportation, electricity, healthcare, education, food security, infrastructure and social protection,” it said.
The organisation said the debate should now focus increasingly on fiscal accountability and the quality of government spending.
It called on the three tiers of government to transparently demonstrate how the additional resources arising from the reform were being used to improve economic and social outcomes.
Global oil shock
The group also stressed the need to distinguish the price increase associated with subsidy removal from more recent increases attributed to movements in global crude oil and refined-product prices.
According to CPPE, petrol was selling at about N774 to N800 per litre before the latest escalation in international energy prices, while prices subsequently rose above N1,300 per litre amid what it described as a sharp increase in global energy prices linked to the Middle East crisis.
“It would therefore be incorrect to attribute the entirety of the latest petrol-price increase to subsidy removal,” the organisation said.
The think tank described the two developments as separate issues requiring different policy responses: the first, a domestic structural reform involving the transition to market-based pricing, and the second, an external commodity price shock.
N20 trillion subsidy bill
CPPE said restoring a universal petrol subsidy could recreate the fiscal and foreign-exchange pressures that prompted the reform.
Using an estimated petrol consumption benchmark of 50 million litres per day and an indicative subsidy requirement of N1,050 per litre, the organisation estimated that the potential subsidy exposure could amount to about ₦ 152.5 billion daily, N1.575 trillion monthly, and approximately N19.16 trillion annually.
It described the figure as an annual burden of about N20 trillion, while acknowledging that the actual cost would depend on factors including consumption, crude oil prices, exchange rates, refining or landing costs, and the regulated pump price.
CPPE also warned that consumption could increase under a subsidy regime as price differentials could recreate incentives for cross-border diversion.
“An annual subsidy bill approaching N20 trillion would impose an enormous opportunity cost,” it said.
According to the organisation, such spending could compete with funding for infrastructure, education, healthcare, security, agriculture and social protection, while potentially widening the fiscal deficit and increasing borrowing and debt-service pressures.
It further warned that increased government borrowing could crowd out private-sector credit, sustain high interest rates and weaken investment, productivity, job creation and economic growth.
“Nigeria would therefore risk replacing an energy-price problem with a much larger fiscal, debt, foreign-exchange and investment problem,” CPPE said.
Targeted relief
Rather than restoring the the petrol subsidy, the organisation urged the government to implement targeted interventions to reduce household vulnerability and business costs.
It recommended expanding affordable public transportation, rail freight, and logistics infrastructure; improving electricity supply; accelerating compressed natural gas (CNG), solar, and distributed energy solutions; and strengthening food production through improved agricultural security, irrigation, rural infrastructure, and logistics.
CPPE also called for targeted support for vulnerable households, improved public healthcare and education, and measures to reduce energy, logistics and financing costs for productive enterprises, particularly MSMEs.
READ ALSO: CPPE urges NMDPRA to tie petrol imports to verified supply gaps
It urged the government to maintain a predictable, market-oriented framework for the downstream petroleum sector to protect investor confidence and encourage further investment in domestic refining.
“The appropriate policy direction is to preserve the downstream petroleum reforms while aggressively mitigating their social and economic costs,” the organisation said.
CPPE said the fiscal gains from subsidy removal must become more visible through infrastructure, public services and productive investment, alongside greater transparency and accountability in the utilisation of additional revenues accruing to the federal, state and local governments.
“The subsidy debate should therefore move beyond the binary question of whether petrol subsidy should be restored.
“The more consequential issue is how Nigeria can convert the gains of the reform into lower structural costs, stronger domestic production, improved competitiveness, greater energy security and measurable improvements in citizens’ welfare,” it said.
The organisation said the recommendations would make the reform “economically sustainable and socially defensible.”
Nigeria’s petrol subsidy was removed in May 2023 after President Bola Tinubu announced during his inauguration on 29 May that “the fuel subsidy is gone.”
The announcement effectively ended the government’s previous system of subsidising petrol costs, prompting the Nigerian National Petroleum Company Limited (NNPC Ltd) to adjust pump prices nationwide in June 2023.
The reform was intended to reduce the government’s financial burden from subsidising petrol.
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The former Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed, has called for effective and efficient regulation of Nigeria’s downstream petroleum sector amid ongoing reforms and changing global market dynamics.
Mr Ahmed, who resigned last year after corruption and abuse-of-office allegations levelled against him by Aliko Dangote, President and Chief Executive of the Dangote Group, made the call while delivering a goodwill message at the celebration of 20 years of OTL Africa Downstream Energy Week in Lagos.
“My four decades of experience have reinforced one enduring lesson: that is, effective regulation cannot operate in isolation from the industry it serves. Good regulation rests on sound policy, credible data, professional competence, meaningful stakeholder consultation, transparency and a clear-eyed understanding of market realities,” he said.
The appearance marks the first time Mr Ahmed has spoken publicly at an industry event since leaving the regulatory agency. He was also presented with an award of special recognition for his role in the growth and success of OTL Africa Energy Week at the gala.
Mr Dangote had accused the former NMDPRA chief of economic sabotage, alleging that the regulator’s policies undermined domestic refining in Nigeria.
He specifically accused the NMDPRA leadership of colluding with international traders and petroleum importers to frustrate local refining by continuing to issue import licences for petroleum products.
Mr Dangote also questioned Mr Ahmed’s sources of wealth, alleging that four of his children attended secondary schools in Switzerland at a combined cost of several million dollars. He argued that the expenditure raised questions about possible conflicts of interest and the integrity of regulatory oversight in the downstream petroleum sector.
Mr Dangote further alleged that Mr Ahmed spent more than $5 million on his children’s secondary education in Switzerland. He identified the children and their schools as Faisal Farouk of Montreux School; Farouk Jr. of Aiglon College; Ashraf Farouk of Institut Le Rosey; and Farhana Farouk of La Garenne International School. According to Mr Dangote, each child spent six years at their respective institutions.
In December last year, Mr Dangote petitioned the Independent Corrupt Practices and Other Related Offences Commission (ICPC) through his lawyer, accusing Mr Ahmed of corruption, abuse of office and economic sabotage. Mr Ahmed has denied any wrongdoing.
The petition followed a public dispute between both men over petroleum importation policies implemented under Mr Ahmed’s leadership at the NMDPRA.
Mr Dangote maintained that the policies undermined Nigeria’s domestic refining capacity, particularly the operations of his multi-billion-dollar refinery.
However, Mr Ahmed had argued that petroleum supply in Nigeria should not be monopolised and that import permits should remain accessible to other market players to promote competition.
Against the backdrop of the allegations and controversy, Mr Ahmed eventually resigned from the NMDPRA.
Regulation and industry transformation
In his remarks at the OTL Africa event, Mr Ahmed argued that responsible operators must recognise that regulation, when properly designed, consistently applied, and fairly enforced, provides the certainty, confidence, and stability required for investment, competition, and sustainable growth.
“This is why platforms such as OTL are important. They help bridge the gap between regulatory objectives and commercial realities. They encourage constructive dialogue, promote mutual understanding, and create opportunities for stakeholders to move beyond competing interests towards common solutions,” he said.
He said he attended the occasion with the perspective of a professional who has devoted more than four decades to petroleum regulation and industry development, including his experience as the NMDPRA’s pioneer Chief Executive.
From that perspective, Mr Ahmed said institutions and platforms that endure for two decades do so because they address genuine needs, deliver sustained value and remain responsive to changing demands.
“OTL Africa has demonstrated these qualities. Your Excellencies, Ladies and Gentlemen, twenty years is more than a milestone; it is a testament to vision, resilience, consistency, and the power of partnership,” he said.
Over the years, he noted, OTL has provided a platform for regulators, operators, investors, policymakers and other stakeholders to exchange ideas, examine emerging challenges, share experiences and collectively seek solutions to issues confronting the industry.
He said the importance of such a platform could not be overstated, given the strategic role of the petroleum and energy industries in economic development.
According to him, the downstream sector affects virtually every aspect of economic life, from transportation and manufacturing to power generation, agriculture, trade and household welfare. Its efficiency, stability and sustainability, he added, have direct implications for national development and people’s quality of life.
Africa’s downstream industry at a turning point
Mr Ahmed said Africa’s downstream petroleum industry was at a defining point of transformation, requiring coordinated and decisive action from governments and industry stakeholders.
He identified energy security, infrastructure deficits, financing constraints, product quality, supply-chain efficiency, market integration, environmental sustainability and the changing global energy landscape as some of the critical issues confronting the industry.
While describing these challenges as significant, he said they also presented considerable opportunities for Africa.
The continent, he argued, has the potential to develop a more integrated, competitive, efficient and resilient downstream energy market.
Realising this potential, he said, would require stronger regional cooperation, investment in storage and distribution infrastructure, modern refining capacity, appropriate technology, transparent market practices and regulatory frameworks that encourage investment while protecting consumers and the public interest.
He also emphasised the need to invest in human capital, noting that the industry’s future would depend not only on infrastructure and capital but also on the competence, integrity and innovative capacity of the professionals who operate and regulate it.
ALSO READ: Nigerian petroleum agency introduces 6 regulations for midstream, downstream sectors
Mr Ahmed urged OTL to evolve beyond a conference and exhibition platform into a stronger catalyst for practical industry solutions, strategic partnerships, investment opportunities and measurable outcomes.
He said discussions at the event should translate into action, partnerships should develop into projects, and ideas generated should contribute to tangible improvements across Africa’s energy value chain.
Institutional continuity and future of the industry
The former regulator also emphasised the importance of institutional continuity, calling for the preservation and transfer of industry knowledge and experience to younger professionals.
He said the experience accumulated over decades must be deliberately shared to prepare the next generation of regulators, entrepreneurs, engineers and energy leaders to address emerging challenges with fresh strategic thinking.
As OTL marked its 20th anniversary, Mr Ahmed urged industry stakeholders to look beyond celebrating past achievements and renew their commitment to the sector’s future.
He called on regulators to strengthen their commitment to fairness, transparency and predictable policies; operators to pursue efficiency, innovation and responsible business practices; investors to provide the capital and long-term commitment required for sustainable development; and policymakers to improve the business environment.
“Above all, let us recognise that Africa’s energy future cannot be built by regulators alone, by operators alone, or by investors alone. It must be built through partnership, trust, and a shared determination to succeed,” he said.
He expressed the hope that OTL’s next 20 years would deliver stronger partnerships, greater investment, smarter regulation, more efficient markets and broader, more reliable energy access for Africans.
“Let us not merely gather to discuss Africa’s energy future; let us unite—with purpose, discipline and urgency—to build it,” he said.
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