Renowned Economist and Chief Executive of Financial Derivatives Company has called on the federal government to adopt a refinery-based subsidy model to reduce and stabilize the price of fuel in the country.
Rewane made the remark in the face of the ongoing US/ Israel attack against Iran which has affected energy costs globally, including Nigeria where the pump price of petrol has almost doubled.
Before the war in the middle east, the product sold for less than N800 but has now risen to N1,300 per litre.
According to Rewane, the federal government can adopt a model, where crude is sold directly to refineries in the country, at a control price, to reduce the price at the pump.
Speaking during a session on Nairametrics TV, Rewane noted that rather than maintaining a broad subsidy regime, Nigeria could adopt a targeted approach by leveraging local refineries to stabilize fuel prices and reduce inefficiencies.
Rewane explained 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.
“Nigeria will actually sell oil to the refiners at a particular price and insist that the refiners bring down their price and pay the difference,” he noted.
According to him, this approach would allow the government to focus on supporting a limited number of refiners instead of subsidising the entire fuel supply chain.
“It is more efficient for Nigeria to pay three or four refineries to keep going and for them to transfer the subsidies to the consumers.”
He also highlighted Nigeria’s structural advantages, including its oil and gas resources and geographic positioning, as factors that support the feasibility of the model.
Rewane’s proposal comes amid ongoing debates following the removal of the petrol subsidy, a policy shift aimed at reducing fiscal pressure and eliminating distortions in the downstream sector.
While subsidy removal has improved government finances, it has also led to higher fuel prices and increased inflationary pressures, affecting households and businesses.
Rewane also linked the proposal to rising global oil prices, noting that increased revenues could provide the fiscal space needed to sustain such a system.
“Nigeria 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.”
Daily Trust
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