The Truth Nigerians Must Understand: Subsidy, Dollar Games, and the Hard Decisions of Bola Ahmed Tinubu -By Abdullahi Abubakar

For years, Nigeria operated an economy that looked stable on the surface but was deeply fragile underneath. Today, as citizens grapple with rising prices, a weakening naira, and the removal of long-standing government supports, frustration is understandable. However, to fully grasp the present situation, one must first understand a simple truth: Nigeria was living beyond its means — and borrowing heavily to sustain an illusion.

This illusion was built on two major pillars: fuel subsidy and multiple exchange rates for the dollar.

The Cost of Keeping Fuel Artificially Cheap

Fuel subsidy was often presented as a benefit to the Nigerian people. In reality, it became a heavy financial burden on the nation.

The true market price of petrol was significantly higher than what Nigerians paid at the pump. To maintain this artificial affordability, the government covered the difference — not from surplus revenue, but largely through borrowing.

In simple terms, Nigeria was like a household that insisted on buying goods it could not afford, using loans to cover the gap. While this made life seem easier in the short term, it quietly piled up debt and reduced the government’s ability to invest in critical sectors such as healthcare, education, infrastructure, and job creation.

Over time, subsidy payments grew into trillions of naira annually, benefiting not just ordinary citizens but also smugglers and middlemen who exploited the system for profit. What was designed as a social support mechanism gradually became an unsustainable financial drain.

The Hidden Subsidy: Cheap Dollars for the Few

Beyond fuel, another less visible but equally damaging practice was the subsidization of foreign exchange.

For years, Nigeria operated multiple exchange rates. Certain individuals and businesses had access to dollars at significantly lower official rates, while the broader market operated at much higher rates.

This created an opportunity for arbitrage — buying dollars cheaply from official channels and selling them at a premium in the open market. The result was enormous profit for a select few, without any corresponding increase in productivity or value creation.

The consequence for the country was severe. It drained foreign reserves, distorted the economy, discouraged investment, and widened inequality. In effect, national resources were being quietly transferred to a small, well-connected segment of society.

The Legacy of Deferred Reality

During the administration of Muhammadu Buhari, these systems remained in place. Fuel subsidy continued, exchange rates were managed artificially, and borrowing increased to sustain government obligations.

While these measures helped maintain a degree of short-term stability, they also postponed difficult but necessary decisions. The true cost of maintaining the system was not fully visible to the average citizen, but it accumulated over time in the form of rising debt and economic distortions.

By the end of that era, Nigeria faced a complex financial situation:

• Significant debt obligations
• Declining revenue efficiency
• Structural imbalances in the economy

Why Today’s Borrowing Appears Higher

One of the most common criticisms of the current administration is that borrowing has increased sharply within a short period. However, this perception is heavily influenced by changes in the exchange rate.

Under previous conditions, when the naira exchanged at approximately ₦400–₦500 to the dollar, external borrowing appeared smaller in naira terms. Today, with the exchange rate exceeding ₦1,500 to the dollar, the same amount of borrowing in foreign currency translates into a much larger figure when expressed in naira.

This does not necessarily mean that borrowing has tripled in real terms; rather, it reflects the depreciation of the naira and the shift toward a more market-driven exchange rate.

A Shift Toward Economic Reality

Upon assuming office, President Bola Ahmed Tinubu introduced two of the most consequential economic reforms in recent history:

• The removal of fuel subsidy

• The unification of the foreign exchange market

These decisions effectively ended the practice of borrowing to sustain artificially low fuel prices and curtailed preferential access to cheap dollars.

While the immediate impact has been painful  with higher fuel costs, increased transportation expenses, and general inflationary pressure  the reforms aim to correct long-standing structural weaknesses in the economy.

Understanding the Current Hardship

The rise in fuel prices and the depreciation of the naira are not isolated events; they are the natural outcome of removing artificial controls.

For years, prices were suppressed below their true market value. Once those controls were lifted, prices adjusted to reflect actual supply and demand conditions.

This transition is inherently difficult. It exposes underlying economic realities that had previously been masked. However, it also creates a foundation for greater transparency, efficiency, and long-term sustainability.

Temporary Pain, Long-Term Gain

Economic reform is rarely comfortable. It often requires short-term sacrifice to achieve long-term stability.

Nigeria’s previous approach  characterized by heavy subsidies, controlled exchange rates, and extensive borrowing  provided temporary relief but ultimately weakened the economy. The current reforms, though challenging, represent an attempt to reverse that trajectory.

The critical question is not whether the reforms are painful — they undoubtedly are — but whether they are necessary. Increasingly, the evidence suggests that continuing on the previous path would have led to even more severe consequences.

Nigeria stands at a defining moment in its economic history. The country is transitioning from a system built on borrowed stability to one grounded in fiscal discipline and market realities.

The administration of Bola Ahmed Tinubu has chosen to confront these challenges directly, rather than postpone them further. While the immediate effects are difficult, the long-term objective is clear: to build an economy that is resilient, transparent, and capable of delivering sustainable growth.

For Nigerians, understanding this context is essential. The hardship being experienced today is not merely the result of present policies, but the consequence of years of accumulated imbalances.

The path forward may be tough, but it is a path toward economic truth  and ultimately, national recovery.