Understanding Tanimu Yakubu’s Argument on Subsidy Removal and Nigeria’s Fiscal Crisis.

Tanimu Yakubu’s intervention on subsidy removal and Nigeria’s fiscal structure deserves serious attention because, unlike much of the public debate, it attempts to explain the country’s economic reality beyond slogans, emotions, and political talking points.

At the center of his argument is a simple but important point. He believes many Nigerians misunderstand what subsidy removal actually means. According to him, removing subsidy does not suddenly create a huge pile of free cash for government to spend. Rather, it stops a fiscal bleeding, removes distortions from the economy, and improves the long term sustainability of public finance. In simple terms, subsidy removal prevents future losses more than it creates immediate prosperity.

That argument is largely correct.

For many years, Nigeria operated multiple subsidy systems simultaneously. Fuel subsidy was the most visible because Nigerians experienced it directly at filling stations. However, there were also foreign exchange subsidies through artificially cheap dollars and electricity subsidies through tariffs that did not reflect actual costs. In all these areas, government was absorbing costs that were not properly reflected in market pricing.

The foreign exchange subsidy was especially significant. For years, some individuals and businesses accessed dollars at rates far below market value. This encouraged round tripping, import dependency, and massive pressure on foreign reserves. Electricity pricing also created hidden liabilities because tariffs remained below the actual cost of generation and distribution, forcing government to intervene continuously through guarantees, debts, and financial support mechanisms.

Tanimu Yakubu is therefore correct when he argues that Nigeria’s fiscal problem goes far beyond petrol pricing. He is also correct when he says that Nigeria’s fiscal system became deeply opaque over time.

The Real Problem, A Porous Fiscal System.

One of the strongest parts of Tanimu Yakubu’s argument is his explanation that Nigeria’s fiscal crisis is not simply about low revenue. It is also about weak revenue capture and poor fiscal visibility.

Over the years, large portions of public finance operated through:

• netting off at source,
• off budget interventions,
• institutional revenue retention,
• opaque deductions,
• quasi fiscal arrangements,
• and weak remittance structures.

This meant that even when revenue was generated, government often did not fully “see” or transparently capture it within the constitutional fiscal chain.

In many ways, this opacity created fertile ground for subsidy fraud, oil theft, inflated claims, hidden liabilities, and weak accountability. Nigeria therefore evolved into a system where public revenue could leak through multiple channels before it ever entered the formal public finance structure.

This diagnosis is largely accurate.

The country’s problem is not only that revenue is insufficient. The deeper issue is that the fiscal system itself became fragmented, porous, and difficult to monitor effectively.

The Federal Government and the Burden of Macroeconomic Stabilization.

Tanimu Yakubu also raises an important point about fiscal federalism and the unequal burden of economic adjustment within the federation.

Following subsidy removal and exchange rate reforms, FAAC allocations to states increased significantly in nominal terms. However, the Federal Government continued carrying the heaviest macroeconomic burdens, including:

• external debt servicing,
• exchange rate stabilization,
• national security,
• power sector liabilities,
• fuel market transition costs,
• and broader economic stabilization responsibilities.

In effect, revenues were shared nationally while many adjustment costs remained concentrated at the center.

That imbalance is real.

When the naira depreciated, the Federal Government’s debt servicing obligations increased sharply in naira terms. Existing liabilities became far more expensive almost overnight. Import dependent government expenditures also became more costly. The Federal Government therefore absorbed much of the immediate stabilization shock caused by subsidy removal and exchange rate adjustments.

This is one of the strongest and most valid aspects of Tanimu Yakubu’s argument.

Why States Still Feel Financial Pressure.

At the same time, the states are not entirely wrong when they argue that inflation consumed much of their gains.

Although FAAC inflows increased significantly after subsidy removal, inflation also raised the cost of governance and project execution across the country. A state that previously executed a road contract at ₦10 billion may now require ₦18 or ₦20 billion for the same project due to:

• higher diesel prices,
• exchange rate depreciation,
• imported material inflation,
• and rising labor costs.

As a result, while revenues increased nominally, their real purchasing power weakened considerably.

This explains why both the Federal Government and the states can simultaneously claim financial pressure.

However, this is also where Nigerians become frustrated. Ordinary citizens are not debating macroeconomic theory. They are evaluating governance through daily lived experience. People are asking simple questions:

• Why is hardship increasing?
• Why does borrowing continue?
• Why do corruption scandals persist?
• Why are public contracts still inflated?
• Why are projects still poorly executed?
• Why do government costs still appear excessive during a period of national sacrifice?

These questions cannot simply be dismissed.

Where the Argument Feels Incomplete.

While Tanimu Yakubu’s analysis is economically sound, it underplays the crisis of governance credibility in Nigeria.

Nigerians are not simply reacting to painful reforms. They are reacting to painful reforms occurring inside a low trust governance environment.

Citizens remember years of:

• subsidy fraud,
• unresolved oil theft allegations,
• opaque crude swap arrangements,
• inflated procurement systems,
• abandoned projects,
• and repeated reports of public funds being diverted.

Because of this history, many Nigerians expected that once subsidy was removed:

• leakages would reduce significantly,
• borrowing would decline,
• and visible development would accelerate.

Some of those expectations were admittedly unrealistic. Nigeria entered these reforms already carrying:

• a heavy debt burden,
• severe foreign exchange pressures,
• weak productivity,
• high import dependence,
• low industrial output,
• and major infrastructure deficits.

Once the naira depreciated, debt servicing obligations rose sharply. Inflationary pressure was therefore inevitable to some degree. This is important because public conversation must remain intellectually honest. Not every post reform hardship automatically proves policy failure.

Some pain was unavoidable.

However, unavoidable pain does not remove the responsibility for disciplined governance. This is where the issue of incentives becomes critical.

Nigeria’s Structural Incentive Problem.

Nigeria’s challenge is not only corruption in the moral sense. It is also about institutional and constitutional design.

The current fiscal structure creates weak incentives across the federation. Many states rely overwhelmingly on federally distributed revenue instead of building productive local economies. Because revenues are centrally pooled and shared, some states face limited pressure to:

• industrialize,
• build export capacity,
• strengthen taxation systems,
• or aggressively improve productivity.

This has encouraged a culture of dependency within the federation.

At the same time, local governments, which should be closest to the people, remain among the weakest institutions in the country.

In theory, local governments should drive:

• primary healthcare,
• basic education,
• rural roads,
• sanitation,
• local markets,
• and grassroots development.

In practice, many local governments remain financially weak, politically captured, or administratively ineffective. As a result, large public expenditures often fail to translate into visible improvements within ordinary communities.

This is one reason many Nigerians feel disconnected from government spending despite rising allocations across all tiers of government.

The Responsibility of All Three Tiers of Government.

The Federal Government therefore has responsibilities it cannot escape. It must:

• improve transparency,
• reduce waste,
• strengthen procurement discipline,
• improve revenue capture,
• and ensure borrowing translates into visible national productivity.

The states also have major responsibilities. They must:

• reduce excessive recurrent expenditure,
• improve internally generated revenue,
• strengthen local productivity,
• invest more aggressively in agriculture and industry,
• and become less dependent on Abuja.

The local governments must finally become functional engines of grassroots development rather than passive administrative structures that consume resources with limited visible impact.

Ultimately, Nigeria’s crisis is not merely about subsidy removal. It is about whether the country can build a fiscal and governance system that is:

• transparent,
• disciplined,
• productive,
• accountable,
• and trusted by citizens.

Conclusion, The Missing Bridge Between Reform and Trust.

Tanimu Yakubu is right that Nigeria cannot continue operating a porous fiscal system built on hidden subsidies, leakages, and opaque obligations. The country needed reforms. The previous system was economically unsustainable.

But citizens are equally right to demand visible evidence that their sacrifices are producing meaningful national outcomes.

At the end of the day, Nigerians are not asking for economic perfection. They are asking for signs that:

• public sacrifice is being shared fairly,
• leakages are genuinely reducing,
• government itself is becoming more disciplined,
• and the painful reforms of today will eventually produce a more stable, productive, and functional country tomorrow.

That is the bridge Nigeria must build.

Because technically correct reforms, implemented inside a low trust governance environment, will always struggle to achieve full public legitimacy.

@yb-May26