From Subsidising Consumption to Redesigning the Economics of Production
The debate around Atiku Economic Recovery Plan (AERP) should begin with a simple proposition: AERP is not merely another subsidy scheme. It is an attempt to redesign the economics of production in Nigeria.
That distinction is fundamental.
For decades, Nigeria has approached economic intervention largely through the traditional subsidy model: government collects revenue, identifies a product or sector it wants to support, and then writes cheques to middle men to reduce the price paid by consumers or producers.
AERP proposes something different.
It asks: Why wait until production becomes prohibitively expensive before government intervenes? Why not reduce the cost at the point where production costs are created?
That is the ABC of AERP.
A — AFFORDABLE INPUTS
The first principle is simple: make strategic domestic feedstock inputs affordable.
The government does not necessarily need to give a refinery ₦1 billion in cash to make it competitive. It can provide competitively priced Nigerian crude to the tune of ₦1 billion.
A fertiliser manufacturer may not need a Treasury cheque if it can obtain predictable, affordable domestic gas.
A textile manufacturer may not need a production subsidy if Nigerian cotton is available through an organised and reliable supply chain.
A steel manufacturer can be supported through long-term access to domestic iron ore, reliable electricity, infrastructure and predictable logistics.
The intervention therefore occurs upstream, at the point where costs can efficiently be generated and tracked, rather than downstream after those costs have already accumulated.
B — BREAK THE COST OF PRODUCTION
The second principle is to break the high-cost structure that makes Nigerian production uncompetitive.
Consider petroleum refining.
If Nigerian crude is produced in Nigeria and a Nigerian refinery is closer to that crude than an overseas refinery, why should the domestic refinery automatically bear every international freight, insurance, financing and transaction cost associated with exporting that crude and subsequently importing refined products?
An AERP framework could establish a transparent domestic crude-supply mechanism that recognises the strategic value of domestic processing.
If, purely for illustration, an international reference price is $80 per barrel while the verified economic cost of supplying a qualifying domestic refinery is $65, the $15 difference does not necessarily have to become a Treasury cheque.
The benefit can be embedded in the transaction architecture.
The subsidy, where justified, follows the barrel—not the politician.
That is a radically different concept from simply writing subsidy cheques.
C — CONNECT THE VALUE CHAIN
The third principle is perhaps the most transformative: connect Nigeria’s resources to Nigerian industry.
Nigeria has crude oil but imports refined petroleum products.
We have natural gas but struggle to make downstream industries globally competitive.
We have limestone but still face high cement prices.
We have iron ore but have not built a sufficiently competitive steel industry.
We produce cotton but have allowed much of our textile industry to collapse.
We produce enormous quantities of agricultural commodities while importing significant quantities of processed food.
AERP asks why these chains remain disconnected.
Imagine Nigerian crude feeding Nigerian refineries; Nigerian gas feeding fertiliser, methanol and petrochemical industries; Nigerian iron ore feeding Nigerian steel; Nigerian limestone feeding cement and construction materials; Nigerian cotton feeding textiles; and Nigerian agricultural products feeding Nigerian food-processing industries.
The objective is not simply to produce more commodities.
It is to move Nigeria from resource extraction to value creation.
D — DON’T SUBSIDISE FAILURE
AERP should not become another mechanism for the government to perpetually finance inefficient enterprises.
Support should be conditional, transparent and performance-based.
Qualifying companies should demonstrate production, employment, investment, domestic value addition and measurable outcomes.
If an enterprise receives preferential access to crude, gas, minerals or other strategic resources, Nigerians must know what they are receiving in return.
That means independent verification, transparent pricing, audited accounts and enforceable performance conditions.
E — ELIMINATE UNNECESSARY COSTS
Sometimes the cheapest subsidy is the cost that the government prevents from arising in the first place.
Bad roads increase the cost of transporting agricultural products.
Unreliable electricity increases manufacturing costs.
Port inefficiency increases the cost of imported machinery and exported products.
Multiple taxation increases the cost of doing business.
Poor logistics destroy agricultural value chains.
AERP should therefore be understood as a broader cost-reduction strategy, combining energy, resources, infrastructure, taxation, logistics and regulatory reform.
F — FOLLOW THE VALUE, NOT THE CHEQUE
This may be the most important distinction.
The conventional question is:
“How much money is the government giving?”
The AERP question should be:
“How much economic value is government unlocking?”
If cheaper domestic crude makes a refinery viable, the benefit appears in lower production costs, greater refining capacity, reduced imports and potentially lower petroleum prices.
If affordable gas makes fertiliser production competitive, the benefit extends to farmers, food prices, employment and exports.
If organised agricultural supply makes food processing viable, farmers gain markets while consumers gain locally produced food.
One intervention can therefore generate multiple economic effects.
G — GOVERNMENT AS ECONOMIC ARCHITECT
AERP does not require the government to own every refinery, factory, farm or processing plant.
The government’s role is to design the market conditions under which private capital can invest profitably in productive sectors.
It can use its regulatory authority, resource ownership, infrastructure, purchasing power, taxation policy and contracting capacity to create an environment in which Nigerian production becomes cheaper and more competitive.
Private capital then does what the government is often incapable of doing efficiently:
invest, produce, innovate and compete.
H — THE MULTIPLIER EFFECT
This is where the real economic proposition lies.
One cheaper strategic input can unlock several industries.
Affordable gas can stimulate fertiliser, petrochemicals, methanol and manufacturing.
Affordable crude can stimulate refining, petrochemicals, plastics and other downstream industries.t
Reliable agricultural feedstock can stimulate food processing, packaging, logistics and exports.
The objective is therefore not merely to save consumers a few naira today.
It is to create an industrial ecosystem capable of generating jobs, investment, exports, tax revenues and sustained economic growth.
I — INDEPENDENT ACCOUNTABILITY
AERP cannot succeed on presidential goodwill or political promises.
It requires architecture.
There must be independent verification of production and supply.
Transparent pricing formulas.
Published beneficiaries.
Performance benchmarks.
Audited accounts.
Anti-arbitrage safeguards.
Technology-driven tracking.
And automatic termination of benefits where agreed conditions are not met.
Otherwise, an innovative economic policy can quickly degenerate into another patronage system.
J — THE BIGGER QUESTION
The ultimate question is not simply:
“Can Nigeria afford AERP?”
It is:
“Can Nigeria afford to continue subsidising consumption whilely leaving the structural cost of production untouched?”
For decades, Nigeria has spent enormous resources trying to make the symptoms of an inefficient economy less painful.
AERP proposes that we attack the causes.
Stop merely subsidising expensive production.
Make production cheaper.
Stop merely compensating for broken value chains.
Reconnect them.
Stop financing consumption where productive capacity can be created.
Build the capacity.
Stop thinking of every intervention as a Treasury expenditure.
Think of the government as an economic architect.
That is the central ABC of Atiku’s AERP 2027.
Its success, however, will depend on whether the architecture is ultimately translated into clear legislation, transparent rules, independently verifiable numbers and enforceable accountability.
The AERP should therefore not be judged merely by how attractive its promise sounds.
Interrogate the mechanism. Test the numbers. Challenge the assumptions. Demand the safeguards.
But do not confuse a new economic architecture with the old subsidy model.
The fundamental proposition is simple:
Instead of perpetually subsidising what Nigerians consume, strategically reduce the cost of what Nigerians produce.
That is the economic possibility AERP puts before Nigeria.
And perhaps the most important question for 2027 is not whether Nigeria
can afford to imagine it.
It is whether Nigeria can afford not to try something fundamentally different.
Alex Ter Adum, PhD
D-37 Policy Reform Think Tank.
