The Presidency has rejected former Vice President Atiku Abubakar’s proposal to restore petrol subsidies, describing the policy as fiscally unsustainable and a reversal of reforms implemented in Nigeria’s downstream petroleum sector.

In a statement issued on Thursday by the Special Adviser to the President on Information and Strategy, Bayo Onanuga, the Presidency argued that returning to the former subsidy regime would impose a fresh burden on public finances and undermine the country’s transition towards domestic refining.

The statement followed Atiku’s recent proposal to restore petrol subsidies if elected president, which the Presidency described as a departure from his previous position that the subsidy regime should be eliminated.

According to the Presidency, the subsidy was not simply money set aside in government coffers to make petrol cheaper, but the absorption by government of the difference between the actual cost of supplying petrol and the regulated pump price.

It said the subsidy regime was dismantled under the Petroleum Industry Act, which provided for its removal by the end of June 2023, although President Bola Tinubu accelerated the process upon assuming office.

The Presidency maintained that restoring the subsidy would require a new legal, fiscal and administrative framework, including identifying how the programme would be financed under the current petroleum-market structure.

It also argued that Nigeria’s petroleum sector has changed significantly since the subsidy was removed, particularly with the emergence of substantial domestic refining capacity.

The statement cited the Dangote Refinery as a major development in local petrol production and said the expansion of domestic refining could help reduce dependence on imported petroleum products, conserve foreign exchange and strengthen energy security.

According to the Presidency, reinstating petrol subsidies could also threaten smaller domestic refineries and undermine investment in local refining capacity.

It further claimed that the removal of the petrol price discount had increased revenues available to the three tiers of government, noting that about N3 trillion was shared from the Federation Account in July.

The Presidency said any proposal to restore subsidies must therefore answer fundamental questions about its cost and financing, including who would bear the difference between the economic cost of petrol and any subsidised pump price.

“If petrol is sold below its economic cost, someone must absorb the difference,” the statement said, arguing that the burden would ultimately be reflected in reduced funding for infrastructure and social services, lower allocations to states and local governments, increased borrowing, higher public debt, or a combination of these.

While acknowledging the hardship caused by higher petrol and transportation costs, the Presidency said the Federal Government was pursuing alternative measures to reduce the burden on households and businesses.

It cited the promotion of Compressed Natural Gas, which it said could be significantly cheaper than petrol for vehicles, taxis and distribution trucks.

The Presidency urged political actors to provide detailed fiscal and legal explanations for any proposal to restore petrol subsidies, including the annual cost, funding source, possible borrowing requirements and the legal changes that may be required.

It also questioned what a renewed subsidy would cover in an increasingly domestic-refining-driven market, asking whether it would subsidise local production, transportation, distribution or another component of the petroleum value chain.

The Presidency said Nigeria’s economic debate should focus on sustainable ways of reducing the cost of living while consolidating reforms in the petroleum sector, rather than returning to what it described as an opaque and fiscally burdensome subsidy system.