Renowned economist and Managing Director of Financial Derivatives Company, Bismarck Rewane, has proposed a shift in Nigeria\u2019s fuel subsidy framework, advocating a refinery-based model that channels benefits directly to consumers.<\/p>\n
Speaking during a session on\u00a0Nairametrics\u00a0TV,<\/a>\u00a0Rewane\u00a0argued that Nigeria\u2019s resource endowment and strategic location provide\u00a0a strong foundation\u00a0for a more efficient subsidy system anchored on domestic refining.<\/p>\n He noted that rather than\u00a0maintaining\u00a0a broad subsidy regime, Nigeria could adopt a targeted approach by\u00a0leveraging\u00a0local refineries to stabilize fuel prices and reduce inefficiencies.<\/p>\n What\u00a0he\u00a0is\u00a0saying<\/p>\n Rewane\u00a0explained that the proposed model would involve the government supplying crude oil to domestic refiners at a controlled price, while ensuring that refined petroleum products are sold to consumers at lower rates.<\/p>\n \u201cNigeria will actually sell oil to the refiners at a particular price and insist that the refiners bring down their price and pay the difference,\u201d he noted.\u00a0<\/p>\n According to him, this approach would allow the government to focus on supporting a limited number of refiners instead of\u00a0subsidising\u00a0the entire fuel supply chain.<\/p>\n \u201cIt is more efficient for Nigeria to pay three or four refineries to keep going and for them to transfer the subsidies to the consumers.\u201d\u00a0<\/p>\n He also highlighted Nigeria\u2019s structural advantages, including its oil and gas resources and geographic positioning, as factors that support the feasibility of the model.<\/p>\n Rewane\u2019s\u00a0proposal comes amid ongoing debates following the\u00a0removal of the petrol subsidy, a policy shift aimed at reducing fiscal pressure and\u00a0eliminating\u00a0distortions in the downstream sector.<\/p>\n More insights\u00a0<\/p>\n While subsidy removal has improved government finances, it has also led to\u00a0higher fuel prices and increased inflationary pressures, affecting households and businesses.<\/p>\n Rewane\u00a0also linked the proposal to rising global oil prices, noting that increased revenues could provide the fiscal space needed to sustain such a system.<\/p>\n \u201cNigeria is going to double its oil revenues because the price of oil has gone up. You must be able to recycle the oil windfall into the pockets of the people.\u201d\u00a0<\/p>\n If implemented, the refinery-focused subsidy model could\u00a0represent\u00a0a middle ground between full subsidy removal and price controls, allowing the government to protect consumers while\u00a0maintaining\u00a0market reforms.<\/p>\n What you should know\u00a0<\/p>\n Recently, the Nigerian Economic Summit Group (NESG) had projected that escalating geopolitical tensions in the Middle East could deliver a massive oil revenue windfall to Nigeria, potentially reaching as high as N30.2 trillion<\/a>\u00a0if the conflict between Iran and Israel becomes prolonged.<\/p>\n