Nigeria’s petroleum subsidy cost has increased by 1,452 per cent between 2006 and 2022, from N257 billion to N4 trillion this year.
Head of Research and Policy Advisory, BudgiT Foundation Iniobong Usen in his report on the Short-Run Costs, Long-Run Payoffs and in-betweens of Petroleum Subsidy Removal in Nigeria said in 2022 alone, Nigeria’s petroleum subsidy budget is more than half of what it cost the government to subsidise the product in 10 years ago.
The report said it will cost Nigeria N4 trillion to subsidise the price of petrol in 2022. To put this cost in proper context, the cumulative budget size of all 36 states is N9.65 trillion, while the total revenue realised in 2020 (NNPC) Group, including all its subsidiaries, is N4.6 trillion. Similarly, Federal Goverment generated N3.9 trillion as revenue in 2020.
Petroleum subsidy was introduced in Nigeria when the energy crises in the 1970s drove the price of crude oil per barrel from $3 to $12. However, sustaining the petroleum subsidy program has come at a huge cost to the Nigerian and is unsustainable.
Recently, Nigeria’s petroleum subsidy program has crowded out spending on physical infrastructure and needed investments in critical social sectors like health, education, water, sanitation and health (WASH) and social protection. Petroleum Subsidy in itself is not a bad policy of the government; however, when a policy begins to fail and negates its intended objectives, it requires a critical assessment.
