Adedeji Defends Subsidy Removal, Cites N53tn Fiscal Risk

By Jennete Ugo Anya

The Chairman of the Nigeria Revenue Service (NRS), Dr. Zacch Adedeji, has argued that President Bola Tinubu’s removal of the petrol subsidy in May 2023 prevented a potential N53 trillion fiscal burden under current global conditions. Speaking to Channels Television recently, Adedeji said that retaining the subsidy could also have pushed the naira towards N3,500 per US dollar, as government continued absorbing the gap between market costs and regulated petrol prices.

DECISION HIGHLIGHT

Adedeji’s argument reframes subsidy removal primarily as a fiscal-risk intervention, with the claimed N53 trillion exposure illustrating the potential cost of maintaining price support during periods of high oil-market and geopolitical volatility.

DECISION MEMO

The core of Adedeji’s case is that subsidy expenditure represented a structural fiscal liability rather than a conventional government benefit. He argued that government was effectively financing consumption by borrowing to sell petrol below its underlying cost.

“Subsidy is not an income. It is like you are using your borrowing money to buy a product and that product is 10 naira, and you are selling it at three naira,” he said.

The N53 trillion figure is presented as a counterfactual estimate of what the subsidy could have cost under the current global environment, rather than a recorded fiscal saving. Its significance therefore lies in the scale of the potential liability and the fiscal exposure the government avoided by removing the subsidy.

Adedeji said: “The subsidy today would have been N53 trillion if Mr President had not removed it, given what is happening in Iran, given what is happening globally.” He added: “With the ripple effects of that, the exchange rate today would have been around N3,500 if that had not been done.”

The argument establishes a transmission mechanism: higher subsidy costs would increase government financing requirements, potentially intensifying pressure on the naira and worsening the fiscal position. Whether the projected exchange-rate outcome would have materialised is, however, inherently uncertain because it depends on multiple fiscal, monetary and external variables.

The reform’s immediate costs are less contested. Subsidy removal sharply increased petrol prices and contributed to higher transport and household expenses. The policy trade-off is therefore between removing a potentially large and volatile fiscal obligation and transferring more of the market-adjustment burden to consumers.

Adedeji described subsidy removal as “the best thing to have happened to this nation” and called the subsidy “evil” because of its long-term fiscal implications. He also said: “What the President deserves now is support and commendation for being a statesman and not a politician.”

Challenging critics of the reform, he asked: “Anybody who says he is coming, just ask them, ‘What will you do differently?’ It is not just saying buffer. Buffer as what?”

On poverty and taxation, Adedeji said: “We are not here to tax poverty; we are here to tax prosperity.” He argued that expanding economic activity and the tax base, alongside the responsibilities of state governments, would be central to improving prosperity.

The policy assessment therefore rests on what government does with the fiscal space created by subsidy removal. Eliminating the liability can improve fiscal sustainability, but its broader economic justification ultimately depends on whether resources are redirected towards productive investment, social protection and conditions that support household incomes.

DATA BOX

• Potential subsidy burden cited by Adedeji: N53tn.
• Exchange rate he estimated could have resulted: N3,500/$.
• Subsidy removal: May 29, 2023.
• Policy mechanism: government ceased subsidising the difference between regulated petrol prices and market costs.
• Principal transmission channels: fiscal financing, exchange-rate pressure and petrol prices.
• Key unresolved issue: conversion of fiscal relief into productive and social outcomes.

WHO WINS / WHO LOSES

The federal government gains greater protection from an open-ended petrol subsidy liability and reduced exposure to global oil-price and import-cost volatility.

Households and businesses absorbed the immediate adjustment through higher petrol, transport and operating costs. The longer-term beneficiaries depend on whether fiscal resources are redirected towards productive investment and effective social protection.

POLICY SIGNALS

The administration is defending subsidy removal as a structural fiscal reform rather than a temporary cost-saving measure. The emerging policy test is whether the absence of subsidy expenditure produces stronger public finances without leaving households disproportionately exposed to adjustment costs.

INVESTOR SIGNAL

Removing a major quasi-fiscal liability improves visibility around government finances and reduces uncertainty associated with petrol subsidy financing. For investors, the more important question is whether the resulting fiscal space contributes to stronger revenue mobilisation, lower financing pressure and productive public investment.

RISK RADAR

The principal risk is that fiscal savings are not sufficiently converted into productivity, infrastructure or targeted social support. A second risk is the uncertainty surrounding counterfactual estimates such as the N53 trillion subsidy burden and N3,500/$ exchange-rate projection. These figures illustrate potential exposure, but should not be treated as realised savings or certain outcomes.