Oil windfalls should cushion Nigerians

FUEL subsidy is back in the spotlight because Nigerians are feeling the strain once more. Tensions in Iran have shown that fuel prices depend on more than local policy. They are affected by war, shipping costs, exchange rates, global speculation, and Nigeria’s limited refining capacity. This pressure is even greater because of a difficult starting point.

Nigeria’s state-owned refineries are not currently providing enough refining capacity to shield consumers from global fuel price shocks. This leaves the country vulnerable when global oil prices rise. It also makes the fuel debate more urgent than politicians admit. That is why the old subsidy question still matters.

Fuel subsidies were never meant to last forever. But they are often used in tough times when global oil prices rise and people face hardship through no fault of their own. Even global climate talks that call for phasing out inefficient fossil fuel subsidies still recognise the need for targeted support for the poorest and most vulnerable. That distinction matters because reform should not mean abandoning citizens during a crisis.

Nigeria’s budget is based on oil prices of about $60 to $64.85 per barrel. If global prices go much higher because of war or instability, the government should have extra funds. The real question is whether some of that benefit should help citizens who are paying more for fuel and food. This matters because Nigeria is not getting the full benefit of higher oil prices.

Nigeria is not making the most of rising oil prices like other major oil producers. Problems with production losses, crude theft, and weak refining capacity continue. The country still spends heavily on imported fuel even though it exports crude oil. A country that exports crude but cannot refine enough for its own needs cannot see higher oil prices as pure profit.

The budget benchmark should be more than just a number in government plans. It should also act as a trigger for social protection in tough times. If oil prices rise far above the benchmark because of war or market disruption, some of the extra revenue should help protect people from rising fuel and food costs. That is the heart of the matter.

This does not mean returning to the wasteful subsidy regime of the past. It means creating a targeted, transparent, and temporary plan to protect families, transport workers, small businesses, and food prices during a global crisis. The real problem was not just the subsidy itself. It was the network of people who abused it, made false claims, and captured benefits meant for the public.

A smart government should punish those who cheat without hurting everyone else. No good parent punishes the whole family because a few people misused family resources. Reform should fix abuse, improve accountability, and close loopholes. It loses its moral value if the burden falls mostly on struggling people instead of those who gained from the old system.

Fuel is not like most other goods because people cannot simply stop using it. Workers need transport, traders need to move goods, and farmers need to get their produce to market. Barbers, tailors, food sellers, printers, welders, and cold-room operators all need petrol or diesel to keep working. That is why every major fuel price increase quickly becomes a wider economic problem.

If petrol goes up from about ₦650 to ₦950 per litre, that is a ₦300 increase on every litre. A transporter buying 40 litres pays about ₦12,000 more each time. A small business using 10 litres a day faces about ₦90,000 more in fuel costs each month. These extra costs do not stay at the fuel station.

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They spread from the fuel station to the bus stop, the market, and finally to the family table. The price of tomatoes, rice, school transport, generator use, and delivery all start to reflect the same fuel shock. That is why fuel policy is also about food, transport, and poverty. It also shows why short-term relief can help.

A temporary subsidy could help if it is well managed. If the government cuts the price by even ₦150 to ₦250 per litre during a crisis, a transporter buying 40 litres could save ₦6,000 to ₦10,000 each time. This relief can slow down fare hikes and rising food prices. Small businesses would notice the difference, too.

A shop owner using 10 litres a day could save ₦1,500 to ₦2,500 daily if part of the cost is covered. Over a month, that adds up to ₦45,000 to ₦75,000 in savings. For many small businesses, this can mean the difference between staying open and closing down. The long-term benefits could be even greater.

When transport fares rise too fast, workers ask for higher pay, businesses raise prices, and people spend less. When millions cut back at once, small businesses lose sales, jobs become less secure, and government revenue suffers as the economy slows. So, the cost of temporary relief should be compared with the cost of deeper economic hardship. That is why fuel policy must be judged beyond accounting figures.

Now that the Dangote Refinery is running and marketers such as MRS, Ardova, Heyden, NNPC Retail, and TotalEnergies are active in distribution, the government has better ways to target support than before. A temporary support system can be more controlled, data-driven, and transparent than the old subsidy system. It can be linked to verified supply, audited volumes, public reports, and clear deadlines. Still, subsidies alone cannot fix Nigeria’s long-term problems.

A country with a rapidly growing population cannot continue depending on imported fuel while public transport is weak and electricity is unreliable. Real reform needs better refining, modern railways, reliable public transport, steady electricity, more local production, and higher household incomes. These are the basics that protect citizens from future shocks. They also require stronger institutions.

Digital tracking systems, direct supply verification, stronger anti-corruption enforcement, and targeted support mechanisms can significantly reduce leakage. Public trust will remain weak if citizens hear only about costs without seeing protection. That is why the real debate should be about design, not slogans. Nigeria does not need a blind return to old subsidies, but it also does not need blind suffering in the name of reform.

Subsidies can be wasteful when they are broad, permanent, and poorly monitored. They can also become unfair when the rich benefit more than the poor, which is why many international institutions warn against inefficient fossil fuel subsidies. But the answer is not to remove all protection at once and leave ordinary people exposed. The answer is to replace abuse with targeted relief, clear data, and honest monitoring.

Other countries have shown that subsidy reform works better when governments explain the policy, phase it properly, and protect vulnerable households. Reform also works better when savings are redirected into transport, health, education, clean energy, and other visible public benefits. If people only feel higher prices without seeing protection, they will naturally distrust the reform. That is why Nigeria must treat subsidy reform as a social contract, not just an accounting exercise.

The debate should not be about whether subsidies are good or bad. The real question is whether Nigeria can create a smarter and temporary system that protects people without bringing back the corruption that damaged public trust. Poverty, business failure, social unrest, and lower productivity all have real costs. Leaders should not make suffering look like sacrifice when better options exist.

Good leadership is not just about cutting state support and telling people to cope. It is about protecting citizens during difficult economic moments. If oil prices rise above Nigeria’s budget benchmark, part of that windfall should cushion the people who are already paying the price. A temporary, transparent, and closely monitored fuel support plan could help Nigerians while larger reforms are underway.

•Adebamiwa is the Managing Editor at Newspot Nigeria and holds a Master’s Degree in Public Policy and Administration from Northwestern University.