Tinubu’s Fuel Subsidy Removal: A Strategic Economic Reform for Nigeria’s Future
Teekay Adams
June 11th 2025
7:00AM
Senior Write and reporter for Adeleke reporters online
+2348103903339
The argument that President Bola Tinubu’s removal of fuel subsidy is no different from what he opposed under Goodluck Jonathan in 2012 fails to consider the
Context, intent, and execution of the policy. While the action may appear similar, the economic philosophy behind it and the accompanying reforms distinguish Tinubu’s approach as a necessary and transformative step for Nigeria’s long-term stability. Below is a detailed analysis addressing key concerns and justifying why this reform is the best economic decision Nigeria has made in recent years.
1. Jonathan’s Subsidy Removal vs. Tinubu’s: A Matter of Governance and Economic Strategy
Criticism: “Tinubu protested subsidy removal in 2012 but is now implementing it—hypocrisy!”
Reality: The difference lies in
Economic preparedness and policy sustainability.
– Under Jonathan (2012):
The PDP government lacked a clear reinvestment plan for subsidy savings.
Nigeria’s fiscal discipline was weak oil theft and corruption were rampant.
Subsidy removal would have merely
Enriched political elites without structural reforms.
Under Tinubu (2023-Present):
Subsidy removal is part of a broader economic overhaul, including forex liberalization, tax reforms, and infrastructure investments.
The government is redirecting savings to critical sectors (transport, agriculture, power) rather than allowing leakages.
Transparency measures such as the Presidential Fiscal Policy & Tax Reforms Committee, ensure accountability.
Economic Justification:
Removing subsidies without a
Comprehensive economic plan (as would have happened under Jonathan) leads to waste. Tinubu’s administration is structuring reforms to ensure long-term gains, not short-term fiscal relief for political expediency.
2. Exchange Rate and Inflation: Short-Term Pain for Long-Term Gain
Criticism:
The naira has fallen, inflation is high—where are the benefits?”
Reality: These are transitional effects of dismantling a distorted economic system.
– Artificial Stability Under Previous Governments:
The CBN burned forex reserves to defend the naira at unsustainable rates (e.g., ₦410/$ official vs. ₦750/$ black market under Buhari).
This created arbitrage opportunities for elites while draining reserves.
– Tinubu’s Market-Driven Reforms:
Naira floated: Initially spiked to ₦1,900/$ but has since stabilized around ₦1,500/$ due to improved forex liquidity.
Forex backlog cleared: Over $7 billion in outstanding obligations settled, restoring investor confidence.
Parallel market premium reduced: From over 60% to less than 10%, signaling true price discovery.
Economic Justification:
Short-term inflation is inevitable when correcting decades of price distortions. However, a realistic exchange rate attracts FDI, reduces speculation, and lays the foundation for
sustainable g
3. Increased FAAC Allocations: Purchasing Power vs. Fiscal Capacity
Criticism:
States get more naira, but inflation erodes its value. Where’s the gain?
Reality:
The nominal increase in revenue is a starting point utilization matters more.
– Under Buhari (2022):
– ₦290 billion FAAC $700 million (at ₦415/$).
– Under Tinubu (2024):
– ₦1.7 trillion FAAC $1.1 billion (at ₦1,500/$).
Key Insights:
– While the dollar value is lower, states now have
more naira liquidity to fund projects.
– The real test is whether governors invest in infrastructure, agriculture, and social programs—some are (e.g., Lagos, Borno, Niger), while others lag
Economic Justification:
Subsidy removal
Increases fiscal space but long-term gains depend on
state-level fiscal responsibility.
The federal government cannot control how states spend—only ensure more funds are available.
4. Mega Infrastructure Projects: Proof of Subsidy Reinvestment
Criticism:
“If subsidy savings are real, why are we still borrowing?
Reality:
Large-scale projects require long-term financing.
– Ongoing Projects Funded by Subsidy Savings:
Lagos-Calabar Coastal Highway (₦15 trillion, 700km, 20+ economic hubs).
Lagos-Abuja-Sokoto Expressway (critical for trade and security).
Port Harcourt-Maiduguri Rail Line (reviving Eastern economies).
– Why Loans Are Still Needed:
Infrastructure financing requires long-term debt instruments (bonds, concessional loans).
Subsidy savings provide seed funding but loans ensure completion.
Economic Justification:
Previous governments
borrowed without revenue streams Tinubu is borrowing backed by increased domestic revenue reducing debt dependency in the long run
5. Agriculture and Food Inflation: Renewed Hope in Action
Criticism:
“A bag of rice was ₦3,500, now ₦80,000—how is this progress?
Reality:
Prices are stabilizing due to strategic interventions.
– Why Prices Rose:
Global inflation (Ukraine war, supply chain disruptions).
Naira depreciation (imported inputs became costly).
– Why Prices Are Falling Now:
Dry Season Farming:
₦100 billion federal investment boosting output.
Dangote Rice, BUA Farms:
Private sector expanding production.
Expected Further Drop:
As harvests enter markets, prices will decline further.
Economic Justification:
Tinubu’s policies focus on long-term food security unlike past regimes that relied on
Import-dependent quick fixes
6. CNG Revolution: Reducing Transport Costs
– Before: Petrol subsidy encouraged expensive PMS dependence.
– Now:
CNG buses charge ₦500 vs. ₦1,000 for petrol buses.
– Future:
As more vehicles convert to CNG transport costs will drop further.
Economic Justification:
Subsidy removal is accelerating the shift to cheaper, cleaner energy, reducing reliance on costly petrol imports.
7. Power Sector: PDP’s Failed Privatization vs. Tinubu’s Reforms
– PDP’s Mistake:
Power sector privatization was cronyism, not reform DISCOs failed Nigerians.
– Tinubu’s Fix:
Electricity Act (2023) allows states to generate power, breaking monopolies.
Economic Justification:
Past policies
Looted national assets
Tinubu’s reforms are institutionally structured for efficiency.
Conclusion: Tinubu’s Reforms Are Painful but Necessary
The current hardship is a transitional phase, not the end result. Previous governments avoided tough decisions, leaving Nigeria with:
– A fraudulent subsidy regime (benefiting smugglers, not citizens).
– An artificially strong naira that scared investors.
– A power sector sold to cronies, not reformers.
Tinubu is rebuilding Nigeria’s economic foundation In 3-5 years, the benefits will be undeniable—just as Rwanda and Indonesia emerged stronger after tough reforms.
Final Answer:
Subsidy removal under Tinubu is not just about cutting costs—it’s about
restructuring Nigeria’s economy for sustainable growth.Unlike Jonathan’s plan (which lacked vision), Tinubu’s reforms are strategic, transparent, and future-focused. The pain is temporary; the gain will be permanent.
By Teekay Adams
teekayadams85@gmail.com
