By Favour Pius
Economist Bismarck Rewane has endorsed a refinery-based subsidy framework as a more efficient pathway to reducing fuel costs in Nigeria, arguing that targeted support for domestic refining could ease price pressures without the distortions associated with blanket fuel subsidies.
Rewane said aligning subsidies with local production would help stabilise pump prices, reduce import dependence, and improve energy security, especially as the country navigates the post-subsidy era marked by volatile global oil prices and exchange rate pressures.
According to him, rather than subsidising consumption at the retail end, a refinery subsidy model would focus on supporting production by lowering operational costs for domestic refiners, thereby translating into more competitive pricing for consumers.
He noted that such an approach could significantly reduce the fiscal burden on government, while ensuring that benefits are more efficiently transmitted across the value chain.
“Subsidising refining output rather than consumption creates a more sustainable system. It improves supply, supports local industry, and ultimately reduces costs to end-users,” he said.
Rewane added that strengthening local refining capacity would also conserve foreign exchange currently spent on fuel imports, while enhancing Nigeria’s balance of payments position.
The proposal comes amid ongoing efforts to reposition the downstream petroleum sector following the removal of petrol subsidies, which triggered sharp increases in fuel prices and broader inflationary pressures.
Industry analysts say a refinery-focused subsidy could complement recent investments in domestic refining infrastructure, including large-scale facilities expected to boost local supply.
They argue that improving efficiency in refining operations, alongside targeted policy support, could help moderate price volatility and support economic stability.
However, experts caution that the success of such a model would depend on transparency, clear pricing mechanisms, and strong regulatory oversight to prevent inefficiencies and rent-seeking behaviour.
They also emphasised the need for a well-defined framework to ensure that cost savings at the production level are effectively passed on to consumers.
As debates continue over the most effective approach to managing fuel prices, Rewane’s position adds to growing calls for market-driven solutions that balance fiscal sustainability with consumer protection.
