The Nigerian government began subsidising petrol prices in the 1970s. And since then, subsidy costs have gulped a significant percentage of the government’s overall spending. In 2019, the petrol subsidy cost was estimated to be about N1.5 trillion — approximately 22 per cent of the federal government’s expenditure (N6.9 trillion) for that year. In comparison, the amount spent on critical sectors of human development like education and healthcare is often lower when compared to petrol subsidies. In the same year, the government spent N634.5 billion (about 9.2 per cent of the budget) and N1.191 billion (about 0.17 per cent of the budget) on education and healthcare, respectively. 

According to available data, the cost of subsidies in Nigeria has increased dramatically from N1.5 trillion in 2019 to N4.39 trillion in 2022, representing a 360 per cent growth. In recent years, the oil sector’s contribution to Nigeria’s GDP has declined, while agriculture has become a vital contributor to the country’s economy. The oil sector contributed 4.34 per cent to the country’s GDP in the fourth quarter of 2022, down from 5.66 per cent in the preceding quarter. Within the same period, the agricultural industry contributed 26.46 per cent to the country’s GDP in the fourth quarter of 2022 and 29.67 per cent in the third quarter of the same year. Statista, a data analytics website, estimates that the agricultural sector has consistently employed over 35 per cent of the country’s total workforce since 2012. Despite this sign, complaints about a lack of access to credit, inadequate infrastructure and losses to adverse climatic conditions are common among farmers and suppliers.

Redirecting subsidies towards the agricultural sector, either in crop production, livestock production or fishery, holds the potential to make produce from Nigerian farms globally competitive, improve foreign exchange earnings, and increase participation, thereby encouraging innovation. By providing direct cash payments to farmers, tax breaks, infrastructure investment and training, the government can boost productivity and profitability in agriculture.

Examining the approaches of other countries, such as Brazil and the United States, one can draw parallels of the significant economic benefits that can be derived from subsiding Nigeria’s agricultural sector. Brazil provides a range of subsidies for crop insurance, credit, and research and development. Likewise, in the U.S., agricultural subsidies are typically provided through a combination of price support, direct payments and insurance programmes. In 2021, the U.S. spent $28.5 billion on agricultural subsidies. Consequently, agriculture, food, and related industries contributed 5.4 per cent to the U.S. GDP and 10.5 per cent of U.S. employment that same year. More importantly, this kept food prices within affordable limits for citizens and ensured food security.

No doubt, food plays a critical role in human survival. The number of Nigerians suffering from moderate or severe food insecurity between 2019 and 2022 increased to 69.7 per cent. Since petroleum subsidies often benefit the rich more than the poor, there is a valid argument for the government to consider prioritising agricultural subsidies over petroleum subsidies. Moreover, the global shift towards renewable energy raises concerns about the long-term viability of oil as a dominant energy source that can attract foreign exchange to Nigeria. 

A shift from focusing on petrol subsidies to bolstering the agricultural sector could help low-income farmers become more productive and profitable, reduce poverty and create wealth in rural communities. With the right investments, domestic food production could increase, boosting food security and curbing inflation. A new generation of farmers could be attracted to the sector, creating a vibrant and sustainable agricultural sector, thereby reducing reliance on imports and making Nigeria a major exporter. 

The rising cost of necessities, such as rice and maize, is a pressing concern for many Nigerians. For instance, the price of a 50-kilogramme bag of rice increased from about N19,000 in 2019 to N40,000 in September 2023. Redirecting subsidies to agriculture could alleviate this hardship and enhance the quality of life for millions.

The economic future of Nigeria hinges on making informed and strategic decisions that cater to the needs of its citizens. Reallocating funds from petroleum subsidies to agriculture is not only a wise policy choice but also a bold and visionary move. Nigeria can learn from the experiences of other nations to pave the way towards a more sustainable and self-sufficient economy. The future is within reach, and now is the time to act.

Onyekwelu is an analyst at SBM Intelligence