16 FREQUENTLY ASKED QUESTIONS ON THE ATIKU ECONOMIC RECOVERY PLAN (AERP) 2027
Target Production | Cap the Cost | Track Every Barrel
- What exactly is Atiku proposing on petroleum subsidy?
The Atiku Economic Recovery Plan (AERP) is not a return to the old petroleum import-subsidy regime. It proposes a fundamental redesign of the subsidy architecture by moving support from imported petroleum products to domestic crude refining.
Under the AERP, the subsidy follows the barrel. Government would provide eligible domestic refineries with crude feedstock at a transparent, discounted and predetermined price, subject to strict conditions on production, pricing, volume and domestic supply.
The objective is simple: use public support to make domestic refining cheaper, rather than use public money to subsidise importers and middlemen.
The principle is simple: the subsidy will follow the barrel. Public support must produce a measurable public benefit.
- How will Nigerians actually benefit from the subsidy?
The benefit will not be left to the discretion of refinery owners.
Access to subsidised crude would be tied to transparent pricing formulas, verified production volumes and measurable domestic deliveries. Refiners receiving the benefit would therefore have a corresponding obligation to pass the cost advantage through to consumers.
The policy creates a direct chain:
Discounted crude → cheaper refining input → lower production cost → lower petroleum-product prices → lower transport and manufacturing costs → cheaper goods and services.
The AERP therefore seeks to establish a stronger correlation between macroeconomic growth and household-level economic relief.
- Will this become another open-ended subsidy that drains the treasury?
No.
A central feature of the AERP is a legally appropriated annual fiscal ceiling approved by the National Assembly.
Government support would operate within a predetermined budgetary envelope rather than an unlimited commitment. This introduces fiscal discipline, parliamentary oversight and predictability.
The policy would replace the old system of uncertain and potentially open-ended subsidy liabilities with a capped, transparent and budgeted intervention.
- How will government prevent corruption, diversion and phantom subsidy claims?
The AERP proposes end-to-end barrel tracking and reconciliation.
Every subsidised barrel should be traceable from:
Upstream production → crude allocation → refinery intake → refining yields → petroleum-product output → domestic distribution → final delivery.
This should be supported by digital measurement, independent verification, production audits and reconciliation of refinery claims against actual crude receipts and product output.
The principle is straightforward: if government subsidises a barrel, government must know where that barrel went and what it produced.
- Who will qualify for the subsidised crude?
The policy would establish clear, rules-based eligibility criteria applicable to both public and private domestic refineries.
Eligibility would depend on factors such as:
- verified refining capacity;
- actual production;
- compliance with regulatory requirements;
- demonstrated domestic supply;
- transparent accounting;
- adherence to the approved pricing formula; and
- compliance with crude-to-product reconciliation requirements.
There should be no preferential treatment based on ownership or political connection. A qualifying private refinery and a qualifying public refinery should operate under the same transparent rules.
- Is this consistent with Nigeria’s existing petroleum law?
Yes. The proposal is designed to complement the existing statutory framework, particularly Section 109(2) of the Petroleum Industry Act (PIA), which establishes the Domestic Crude Supply Obligation (DCSO) within the framework of Nigeria’s national energy-security objectives.
The legal framework for ensuring adequate domestic crude supply therefore already exists. The central issue is how to create the appropriate fiscal and commercial incentives to make domestic refining economically competitive and capable of delivering energy security.
The AERP seeks to provide that missing incentive architecture.
- Why does Nigeria need a fiscal incentive for domestic refining when the DCSO already exists?
Because a legal obligation to supply crude does not automatically guarantee that domestic refining will be economically viable.
The DCSO establishes the obligation. The AERP addresses the economic incentive required to make that obligation commercially productive.
One barrel of crude generates multiple refined products and petrochemical feedstocks. Keeping more of that value chain within Nigeria means that the country can capture greater economic value domestically rather than exporting crude and importing expensive finished products.
The AERP therefore seeks to transform the DCSO from a statutory obligation into a functional domestic energy-security mechanism.
- If government can provide incentives to upstream producers, why should domestic refining be treated differently?
The Nigerian petroleum industry already contains various fiscal and upstream incentives designed to encourage exploration and production.
The AERP asks a straightforward economic question:
If the Nigerian state can provide fiscal incentives to stimulate upstream investment and production, why should it be impossible to provide carefully targeted incentives to domestic refining when the objective is cheaper fuel and greater national energy security?
The distinction is that the AERP proposes an incentive with a direct and measurable domestic consumer objective: cheaper locally refined petroleum products.
- Where will government get the money to finance the AERP?
The proposal does not require government to accumulate a large cash fund or borrow money upfront to finance the subsidy.
The principal intervention is an input-feedstock discount applied to Nigeria’s crude allocation for qualifying domestic refining.
Rather than government first collecting revenue, putting the money into a subsidy pool and subsequently paying importers or marketers, the AERP would build the support mechanism into the crude-supply transaction itself.
This substantially changes the fiscal architecture of the intervention.
- Will the policy reduce revenue available for FAAC?
There could be an immediate reduction in the revenue recognised from the affected crude transactions because the crude would be supplied to qualifying domestic refiners at a predetermined discount.
But that should not automatically be equated with an equivalent permanent loss to the Federation.
The AERP envisages a transparent, capped and budgeted pricing mechanism, subject to market conditions and periodic review. More importantly, the economic activity generated by domestic refining can produce compensating fiscal returns through company income taxes, employment, consumption taxes, corporate activity, domestic value addition and other production-related revenues.
There is also an important foreign-exchange dimension.
A thriving domestic refining industry would substantially reduce Nigeria’s dependence on imported petroleum products and therefore reduce the demand for foreign exchange required to finance those imports. Lower structural demand for forex can ease pressure on the naira and improve exchange-rate stability.
That can generate foreign-exchange differential gains across the Federation’s revenue and expenditure structure, while reducing the naira cost of imported inputs and improving the predictability of government finances.
The proper fiscal question is therefore not simply:
“How much crude-discount revenue does FAAC give up?”
It is:
“What is the net fiscal and economic return when Nigeria retains more value domestically, reduces its forex demand, expands taxable economic activity and ultimately earns foreign exchange from exporting refined petroleum products?”
- Will implementing the AERP require the cancellation or renegotiation of existing Joint Ventures (JVAs)?
No.
The AERP is not predicated on any wholesale cancellation or repudiation of existing contractual obligations under Nigeria’s upstream Joint Venture arrangements.
Its objective is to create a rules-based mechanism for domestic crude supply and refining incentives within the existing petroleum-sector architecture.
The policy would therefore be structured to respect existing contractual rights while using the statutory DCSO framework to advance Nigeria’s energy-security objectives.
- Why subsidise domestic refining before fixing Nigeria’s public refineries?
Because the policy does not depend exclusively on public refineries.
Nigeria already has substantial private-sector refining capacity, and additional capacity is expected to come on stream. That means the country can begin building a competitive domestic refining market immediately rather than waiting indefinitely for every public refinery asset to become operational.
The AERP would also ensure that public and private refineries compete under the same transparent crude-access rules.
The objective is not to choose between public and private refining. It is to ensure that every viable domestic refining asset contributes to national energy security.
- Is Atiku simply reversing his position on subsidy removal?
No. The AERP reflects a change in economic circumstances and policy instruments, not an abandonment of economic logic.
In 2023, Nigeria was overwhelmingly dependent on imported refined petroleum products and its public refining capacity was effectively unavailable at commercial scale. Import subsidy under those circumstances created enormous opportunities for arbitrage, opacity and corruption.
The circumstances have changed.
Nigeria now has significant private refining capacity, with further expansion expected. Consequently, the economic possibility of shifting from product-import subsidy to domestic-refining input support is fundamentally different.
This is precisely where the principle of ceteris paribus (all other things being equal) matters. All things are no longer equal.
As the facts change, rational economic policy must change with them.
- What makes the AERP different from the old subsidy regime?
The old model primarily subsidised the price of imported petroleum products and became vulnerable to opaque claims, import arbitrage, phantom volumes and weak accountability.
The AERP proposes to subsidise a verifiable productive input—domestic crude feedstock.
Its safeguards include:
- a statutory and budgetary fiscal ceiling;
- transparent pricing formulas;
- verified refinery capacity;
- end-to-end crude tracking;
- product-output reconciliation;
- domestic-delivery obligations;
- anti-arbitrage controls;
- equal eligibility rules; and
- a sunset mechanism.
It is therefore better described as a production-support and energy-security intervention, rather than a recreation of the old import-subsidy regime.
- Will the subsidy become permanent?
No.
The AERP envisages a statutory sunset clause and progressive phase-out.
As domestic refining capacity expands, refinery efficiency improves, competition deepens and petroleum-product prices become increasingly determined by competitive domestic production, the fiscal intervention should progressively decline.
The ultimate objective is not permanent government intervention.
It is to use temporary, targeted and measurable public support to build a self-sustaining domestic refining ecosystem capable of delivering energy security, cheaper petroleum products and greater value retention within Nigeria.
- Will lower domestic fuel prices not encourage smuggling to neighbouring countries?
Not if the policy is properly designed, technologically monitored and implemented as part of a broader regional energy-security strategy.
It is true that a significant price differential between neighbouring markets can create an incentive for arbitrage. But that is not an argument against cheaper fuel for Nigerians. It is an argument for technology-driven monitoring, effective enforcement and regional coordination.
The AERP would therefore deploy modern technology to monitor petroleum products from refinery gate through depots, transportation networks and retail outlets. Digital product tracking, electronic invoicing, geolocation, automated volume reconciliation and real-time monitoring can make diversion of subsidised products substantially more difficult.
But there is an even more important structural consideration: the West African petroleum ecosystem is changing rapidly.
Nigeria’s neighbours are increasingly developing their own local refining capacity too. Countries in the Sahel, particularly Niger and Chad, as well as Ghana and other countries along the West African coast, are investing in or expanding local refining capabilities.
Their governments will themselves have a strong economic incentive to prevent uncontrolled inflows of artificially cheap Nigerian petroleum products from undermining their own domestic refining investments.
The subregional petroleum ecosystem is therefore becoming transformative rather than merely transactional.
The objective should not be to design Nigerian petroleum policy on the assumption that neighbouring countries will forever remain dependent on imported Nigerian products. As refining capacity expands across the subregion, the incentive structure for large-scale illegal arbitrage will progressively change.
The bigger opportunity: Nigeria becomes the supplier, not the smuggling victim
There is also a more strategic way to view the issue.
Nigeria’s domestic petroleum-product demand is projected at approximately 50 million litres per day. As Nigerian refining capacity expands beyond domestic requirements, the country can transition from being a perpetual importer of refined petroleum products to becoming a net exporter of refined products within the subregion and eventually beyond it.
That is the reverse side of the AERP proposition, and potentially its greatest economic dividend.
For decades, Nigeria has exported crude oil and then used scarce foreign exchange to import products refined from that same crude.
The AERP seeks to reverse that value chain:
Crude extraction → domestic refining → domestic consumption → surplus production → regional exports → foreign-exchangeearnings.*
Nigeria must not only export crude. Nigeria can refine here, consume here, manufacture here, and export refined products to the rest of the subregion and beyond.
That is the icing on the cake of the AERP: the policy is not merely about cheaper petrol. It is about transforming Nigeria from a raw-crude exporter and refined-product importer into a regional refining and energy-products hub.
THE AERP PROPOSITION IN ONE SENTENCE
Stop subsidising the importation of finished petroleum products; instead, use a capped, transparent and traceable crude-feedstock incentive to make Nigeria’s domestic refining industry competitive, while ensuring that the resulting cost advantage reaches Nigerian consumers.
Target Production. Cap the Cost. Track Every Barrel.
The subsidy will follow the barrel. Public policy must produce a measurable public benefit.
Alex Ter Adum, PhD
