Zacch Adedeji’s arithmetic, By Joshua Ocheja

…there is no economic or development theory that is superior to the balance sheet. The reality of the balance sheet is the moment where underlying assets, actual liabilities, cash flows, and debt obligations are assessed at their true net realisable value. This translates to the fiscal health of the country. And it matters a lot. This is why we need to set aside political considerations in our analysis of the subsidy regime and face our reality. Those that have questioned the removal of subsidy are in denial of basic arithmetic.

I watched the recent interview of the Chairman of the Nigeria Revenue Service (NRS), Zacch Adedeji, on Sunday Politics on Channels TV. He said, “We would have been spending about ₦53 trillion yearly on petrol subsidy if President Bola Tinubu had not removed the scheme.” This is not what most Nigerians love to hear. The reason is obvious, and I don’t have to mention it. But he said it and indeed opened a new vista of understanding in the whole subsidy regime as practiced in the country before now. What is subsidy, and how has it been funded since it was introduced by the General Yakubu Gowon military regime in 1973 to cushion Nigerians against rising inflation and equalise fuel prices nationwide?

In 1977, the General Olusegun Obasanjo military regime institutionalised it through the Petroleum Price Control Act of 1977 by unifying retail prices — not just for petroleum products across the country, as other essential commodities were also covered. In the case of local pump prices, the government absorbed the difference between local pump prices and production/import costs. This was the beginning of the subsidy albatross that almost consumed the country. There was an oil boom in the 1970s, and the government used public funds to bridge the gap without any reasonable strain on the economy. It was a populist policy that was meant to be temporary.

Obasanjo has a history of establishing populist policies that were mostly time-bound. The mistake was that the adoption of some of these policies became permanent. Our development over the decades came with its attendant constraints on our revenue generation. There were various competing needs that were just as important as subsidising petroleum production and consumption costs. As the years went by, the subsidy regime became unsustainable. But its removal was politicised so much that it became a national anthem.

It wasn’t like it was convenient for successive administrations, but the political implications of removing subsidy payments were also advanced by political advisers, while economic advisers spoke in hushed tones. We ran a fiscal deficit regime that no administration ever acknowledged on the pages of newspapers. I recall before taking office, Muhammadu Buhari questioned the very existence and authenticity of the subsidy regime, calling it a scam created by middlemen. Midway through his administration, he described it as “a heavy burden on the national treasury” and an “unsustainable fiscal drain.” This gave birth to the enacting of the Petroleum Industry Act (PIA) of 2021.

In 2021, the Emir of Kano, Sanusi Lamido Sanusi, at the unveiling of his book, For the Good of The Nation, said the “country cannot continue to borrow to fund consumption”, in reference to the subsidy payments. Ngozi Okonjo-Iweala, former finance minister and Director-General of the World Trade Organisation, at the unveiling of her book, Fighting Corruption is Dangerous: The Story Behind the Headlines, published in 2018, described fuel subsidy as “a regressive policy that disproportionately benefited wealthy oil marketers, smugglers, and higher-income car owners rather than the poor it was publicly claimed to protect.” She concluded that the scheme created “a breeding ground for fraud and rent-seeking” at the expense of national development.

These two examples are some of the contentious debates on the fuel subsidy regime as a whole. But there is another dimension. The dimension of borrowing to fund consumption.

The $2.2 Billion Eurobond

A March 2022 report in Premium Times — headlined “Nigerian govt to use $2.2 billion from Eurobond money for fuel subsidy” — exposed the depth of our fiscal dilemma. The then Finance Minister, Zainab Ahmed, conceded that rising global oil prices had pushed the nation into a precarious position due to the import of refined products. With the annual subsidy bill climbing toward ₦3 trillion against the 2022 net federal retained earnings of only ₦5.30 trillion (out of ₦12.59 trillion gross federally collected revenue), the math became impossible. The Federal Government could no longer finance the policy through conventional earnings, leaving it no choice but to deploy $2.2 billion in borrowed Eurobond capital to fund domestic fuel consumption.

What was the economic rationale? Looking at post-2022 figures, funding subsidies was mathematically impossible against the net federal revenues of ₦11.93 trillion in 2023, ₦21.43 trillion in 2024, and ₦23.06 trillion in 2025. To claim that the regime was sustainable is the height of delusion — a classic piece of voodoo economics detached from balance sheet realities.

Was Subsidy Sustainable?

Why did we resort to borrowing to fund subsidy? This was the central point Zacch Adedeji emphasised when he noted that the subsidy regime had become structurally unviable. Continually borrowing to sustain the regime is akin to pouring water into a basket. What happens when water is poured into a basket? It drains straight through the gaps, and no matter how much water you pour or how fast you pour it, the basket will never hold it.

The NRS chair gave a scary projection of what subsidy payment would have been if the President had not discontinued it, given what is happening in Iran, and its impact on the global oil market. He said subsidy payment would have gulped over “76 per cent of the Nigerian budget.” I don’t need to be an economist to understand the implications of such a situation. What were the options if subsidy was not removed? To continue borrowing to fund a regime that has several question marks? I think the decision of President Tinubu to remove subsidy was a reality-check decision in my estimation.

Subsidy Is Not an Income

The NRS boss dramatised his position by stating that subsidy is not an income. He was correct. He questioned the rationale behind the advocacy that the government should have created a buffer before the removal of subsidy. He asked: “What do you call a buffer? Subsidy is not an income. It is like you are borrowing money to buy a product for ₦10 and selling it for ₦3.” This is called deficit-financed consumption — using high-cost borrowed capital to fund temporary consumption rather than wealth-generating assets.

The original intent behind the subsidy regime has been eroded by a shrinking purse that is barely enough to meet our needs. Subsidising consumption when surplus revenue exists is one thing; borrowing to finance it is an unviable enterprise that does little more than deepen our fiscal vulnerabilities.

According to the NRS boss, there is a gross misunderstanding of what the subsidy regime entailed. It was deeper than what is in the public space. The idea to discontinue it, though difficult for political expediency, was necessary to prevent a deeper economic crisis. The NRS boss spoke from the understanding and competence of an intellectual and an accountant. For accountants, it is about balance sheets. And his position was simply that our balance sheets can’t fund subsidy payments as things stand.

In my conclusion, there is no economic or development theory that is superior to the balance sheet. The reality of the balance sheet is the moment where underlying assets, actual liabilities, cash flows, and debt obligations are assessed at their true net realisable value. This translates to the fiscal health of the country. And it matters a lot. This is why we need to set aside political considerations in our analysis of the subsidy regime and face our reality. Those that have questioned the removal of subsidy are in denial of basic arithmetic.

Joshua Ocheja is a military historian and alumnus of the Nigerian Defence Academy.