‘Why are we still borrowing after subsidy removal?’

Nigeria's fuel subsidy removal in 2023 was heralded as a transformative fiscal reform—one that would free billions for debt servicing and infrastructure. Yet 18 months later, the nation continues accumulating foreign debt while domestic refining capacity remains chronically underutilised. This paradox exposes a deeper structural malaise: Nigeria's economy cannot translate policy wins into tangible financial relief because it has outsourced its refining future to international markets.

Central Bank Governor Olayemi Sanusi has articulated what many investors quietly suspect: the subsidy removal stripped away a symptom without addressing the disease. Nigeria still imports refined petroleum at global prices while its own refineries operate below nameplate capacity. The Dangote Refinery, Africa's largest at 650,000 barrels per day, has faced crude supply constraints and feedstock cost pressures. Meanwhile, the Port Harcourt and Warri facilities languish, their technical and logistical problems unresolved. The result is a double hit to the budget: Nigeria pays market rates for imports AND carries the debt burden of underperforming domestic assets.

## Why Has Debt Actually Increased Post-Subsidy Removal?

The government projected N5+ trillion in annual subsidy savings would redirect toward debt reduction and healthcare. However, three competing forces have eroded this windfall. First, crude output volatility—production has fluctuated between 1.4–1.8 million barrels per day, limiting export revenues. Second, refining margin compression: global refined product prices have softened, reducing arbitrage opportunities that local refiners could exploit. Third, and most troubling, the absence of genuine production discipline. Without functional domestic refining, Nigeria remains hostage to global spot markets for petrol, diesel, and jet fuel, meaning sudden price spikes (e.g., Middle East geopolitical shocks) cascade directly into the federation's import bill.

Sanusi's critique carries weight because the data supports it. Nigeria's oil refining capacity has stood at ~1.5 million barrels per day for a decade, while demand is ~40 million liters daily (roughly 250,000 bpd equivalent). That 80% import dependency is not inevitable—it is a policy failure. The Dangote facility should have closed this gap by 2024, but logistics and crude supply agreements have constrained throughput to ~400,000 bpd in practice.

## What Do NNPC's Equipment Denials Signal?

The NNPC's recent statement denying allegations of equipment sales from refineries, while formally categorical, hints at deeper institutional dysfunction. Reports of scrap material transfers—whether true or not—reflect pervasive skepticism about management accountability. Investors interpret such denials as defensive posturing rather than confidence. Transparent asset audits and third-party refinery inspections would restore credibility far better than categorical press releases.

The refining bottleneck ultimately undermines Nigeria's debt trajectory because it prevents the economy from capturing value from its primary commodity. Until the NNPC, Dangote, and government align on crude supply contracts, maintenance standards, and export strategy, subsidy removal will remain a fiscal illusion—a policy that redistributes pain without creating genuine savings.

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