Why Reintroducing Fuel Subsidy Would Be Difficult Under Nigeria’s Revenue-Sharing System
Before getting carried away by political promises to restore fuel subsidy, we should ask where the money for it would come from. Subsidy payments were traditionally deducted from the Federation Account before the balance was shared among the federal, state and local governments. Fuel subsidy was introduced during military rule, when policy could be imposed through decrees. Under democracy, restoring it would be far more difficult. A president would need the cooperation of the 36 state governments and 774 local governments, since subsidy deductions would reduce the funds available for monthly allocations. If the Federal Government makes such deductions without the agreement of other tiers of government, states and local governments could challenge it in court. Even if they consent, their budgets are now built around revenues received after subsidy removal. Bringing it back could shrink their funds, disrupt projects and salaries, and force them to borrow more.
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