By Emeka Eboagwu

When former Vice President Atiku Abubakar unveiled the petroleum component of the Atiku Economic Recovery Plan (AERP), the immediate reactions fell into familiar camps. Supporters framed it as a humane correction to the hardships unleashed by subsidy removal. Critics dismissed it as a return to the failed subsidy politics of the past. Both sides are missing the more important question.

The real issue is not whether subsidies are good or bad. It is whether Nigeria can design any form of petroleum support that is transparent, limited, verifiable, and genuinely beneficial to consumers. On that score, AERP deserves credit for moving the conversation forward, but not yet for solving the problem.

The proposal is a genuine improvement on Nigeria’s old import-subsidy regime. It embraces concepts that should have been part of fuel policy years ago: a fiscal ceiling approved through the budget, sunset provisions tied to domestic refining growth, open eligibility rather than favouring a single player, and stronger transparency requirements.

Most importantly, it acknowledges an uncomfortable reality. Nigeria’s experience since 2023 suggests that removing subsidies on paper does not necessarily eliminate subsidy-like costs from the system. Questions surrounding NNPCL’s Energy Security Expenses, foreign-exchange differential absorption, and broader Federation Account reconciliation remain legitimate subjects of public scrutiny. The demand for transparency is not partisan. It is a requirement of sound governance.

Yet good diagnosis does not automatically produce good policy.

The central weakness of the AERP proposal is that it promises outcomes without specifying the mechanisms. It repeatedly assures Nigerians that costs will be capped, benefits will be targeted, and abuses will be prevented. What it fails to provide are the details that would make those assurances credible.

There is no published subsidy formula. No proposed ceiling. No estimate of likely fiscal costs. No quantitative explanation of how the benefit reaches consumers rather than remaining somewhere along the supply chain.

A subsidy model without numbers is not really a subsidy model. It is a statement of intent.
That criticism matters because Nigeria has spent decades learning an expensive lesson: incentives matter more than promises. The proposal’s most important operational feature is the idea of supplying refiners with crude at a preferential price. At first glance, this appears sensible. Supporting domestic production seems preferable to subsidising imported fuel cargoes whose costs and volumes are notoriously difficult to verify.

The problem is that discounted crude creates the same fundamental challenge that plagued Nigeria’s foreign-exchange subsidy era. Any gap between an administered price and a market price immediately becomes an economic rent. The larger the gap, the stronger the incentive to capture access to it.

The proposal addresses this primarily as an enforcement challenge. It promises stronger audits, independent verification, and severe penalties for diversion. Those are worthwhile measures. But they do not eliminate the underlying incentive. Good policy design should minimise opportunities for rent-seeking before enforcement becomes necessary. A system that depends entirely on perfect monitoring eventually becomes a system that depends on political discretion.

Nor is there any clear explanation of how consumers would receive the promised benefit.
Nigeria’s recent experience offers a useful warning. Access to domestically supplied crude did not automatically lead to pump prices below market levels. Refiners remained able to price close to import parity. Without binding pass-through mechanisms, there is no guarantee that lower input costs translate into lower prices for motorists.

The proposal therefore assumes consumer benefit rather than engineering it. To be fair, this criticism should not be directed only at AERP.

The current government’s arrangement suffers from many of the same transparency deficits. Public debate over Energy Security Expenses, foreign-exchange liabilities, and NNPCL accounting reflects a broader problem: Nigerians cannot clearly see the full fiscal cost of petroleum support, nor can they easily determine who ultimately benefits.

That is why the country’s fuel debate often generates more political heat than economic clarity. The difference is that AERP is presenting itself as an alternative. An alternative should be held to a higher standard than a critique.

There is, of course, a more radical position: eliminate petroleum subsidies entirely, allow full market pricing, and provide direct cash transfers to vulnerable households. Many economists favour this approach. There are serious arguments in its support.

This is not an attempt to settle that debate. Instead, it addresses a narrower question: if Nigeria’s political economy is likely to sustain some form of petroleum support, what design minimises waste, opacity, and rent-seeking?

The answer begins by abandoning the idea of discounted crude allocations. Instead of providing cheap crude, government should establish a competitive, reverse-auctioned production credit. Refiners would bid for the minimum support required to supply the domestic market at or below a published target price. The lowest qualifying bids would win.

The advantage is straightforward. Crude would continue trading at full market value, eliminating much of the arbitrage opportunity created by preferential pricing. Government support would be explicit, budgeted, measurable, and easier to audit.

But reverse auctions are not magic.

They work best in genuinely competitive markets. Nigeria’s downstream reality is more complicated. Any realistic discussion of domestic refining must acknowledge one fact: Dangote Refinery currently dominates the sector. Public reporting suggests it receives the overwhelming majority of domestic crude allocations and operates at a scale unmatched by any domestic competitor. In such an environment, auctions can produce weaker competition, strategic bidding, or even a situation where government has little choice but to negotiate with a dominant player.

The lesson is not that auctions fail. The lesson is that auctions succeed only when competition is genuine.

That means any production-credit scheme should specify bidding rules, price-disclosure requirements, reserve-price thresholds, market-concentration safeguards, and contingency arrangements for periods when only one viable bidder exists. Otherwise the mechanism risks becoming another vehicle for negotiated allocation under a different name.

The proposal’s repeated references to “independent verification” raise another important question: independent verification by whom? Nigeria already possesses an institution with a transparency mandate in the extractive sector- NEITI. Rather than creating another agency, government could expand NEITI’s role to include real-time reconciliation of crude allocations, refinery receipts, product deliveries, and subsidy payments. Monthly reporting would provide far greater oversight than the annual disclosures that currently dominate transparency discussions.
Yet institutional strengthening is not simply a technical exercise.

Giving NEITI real-time access to NNPCL, NUPRC, customs, ports, and financial data would require political actors to surrender discretion and accept greater external scrutiny. Protected statutory funding, broader governance representation, and stronger information-access powers would all improve independence. But none of those reforms are automatic. The challenge is political as much as administrative.

Transparency succeeds only when the coalition demanding disclosure is stronger than the coalition benefiting from opacity. Any government proposing such a model should explain not only how NEITI would be strengthened, but why those holding power would agree to strengthen it. The irony of Nigeria’s subsidy debate is that everyone now speaks the language of transparency while providing remarkably few figures.

AERP deserves criticism for this omission. But anyone proposing an alternative should avoid the same mistake.

If a future production-credit programme is to be credible, government should publish at least four things from the outset:

The fiscal envelope allocated to the programme.
The formula linking support levels to international prices and exchange rates.

The refinery-capacity benchmarks that trigger gradual subsidy reductions.

The proportion of funding reserved for direct transfers to low-income households.
Numbers do not eliminate political disagreement. They simply make it harder to hide behind rhetoric.

The strongest aspect of the AERP proposal is that it recognises many of the failures of Nigeria’s previous subsidy regimes: opacity, uncontrolled liabilities, and consumer benefits that are more often promised than demonstrated. The weakness is that it largely answers those failures with adjectives rather than mechanisms. “Targeted.” “Transparent.” “Audited.” “Capped.” These are desirable characteristics, not policy designs.

Nigeria’s next fuel-support framework, whether proposed by the government, the opposition, or anyone else, should be judged on a simple question: can citizens clearly see who receives the support, how much it costs, who benefits, and when it ends?

That requires more than intentions. It requires formulas, institutions, incentives, and numbers.

Until those details exist, the debate will remain what it has too often been: a contest between competing narratives rather than competing mechanisms. And Nigeria has already paid too much for that kind of politics.

Dr Eboagwu is a global social sustainability expert and energy economist based in the United Kingdom whose work focuses on petroleum sector governance, supply chain sustainability and energy policy reform.

He can be reached via: [email protected]