The Independent Media and Policy Initiative (IMPI) has warned that former Vice President Atiku Abubakar’s proposal to restore petrol subsidy if elected President could reduce revenue available for distribution to states and local governments and further strain Nigeria’s fragile fiscal position.

The policy group, in a statement signed by its Chairman, Dr Omoniyi Akinsiju, said Atiku’s proposed Atiku Economic Recovery Plan (AERP), which seeks to shift subsidy from fuel importation to domestic production, could ultimately recreate the fiscal burden associated with the discontinued subsidy regime.

Under the proposal, eligible public and private refineries would receive domestic crude at discounted prices, provided they pass the savings on to consumers through a transparent pricing mechanism. The programme, according to Atiku’s plan, would also operate within an annual budget ceiling approved by the National Assembly.

IMPI, however, argued that subsidising crude supplied to refineries would amount to an indirect deduction from oil earnings before such revenue reaches the Federation Account.

It said: “Atiku’s model repeats this exact pattern. By giving discounted crude oil directly to local refineries, the government creates a massive hidden deduction.”

The group maintained that the resulting reduction in oil revenue would translate into a smaller distributable pool for the three tiers of government, limiting the cash available to states and local governments for infrastructure, healthcare, water supply and other public services.

It further contended that the proposal could undermine ongoing federal projects and weaken investor confidence by reducing Nigeria’s dollar earnings and creating uncertainty around public finances.

According to IMPI, the proposed subsidy would also disproportionately benefit wealthier Nigerians who consume more petrol, while poorer citizens who depend largely on public transportation would receive less benefit.

The policy group argued that the proposal merely changes the mechanism through which government bears the subsidy cost, rather than eliminating the underlying fiscal burden.

IMPI said: “By replacing a cash subsidy with a crude oil revenue discount, it simply re-packages the original fiscal problem.”

It further warned that a smaller revenue pool would mean lower allocations through the Federation Account Allocation Committee (FAAC), potentially constricting the finances of sub-national governments at a time when they are expected to fund critical infrastructure and social services.

The group also said the policy could unsettle foreign investors and Nigeria’s trading partners, arguing that reduced government revenue and lower crude earnings would pose additional risks to the country’s fiscal stability.

Rejecting the proposal as an economic alternative, IMPI described it as a politically attractive but fiscally risky intervention that could reverse gains from the removal of petrol subsidy.

It said: “Reintroducing fuel subsidies would severely destabilise Nigeria’s fiscal health, violate clear statutory laws, and push millions of citizens back into deeper structural poverty.”

The policy group urged greater emphasis on reforms capable of expanding production, strengthening domestic refining capacity and protecting vulnerable Nigerians without placing additional pressure on the Federation Account.