How should federal spending change in a post-subsidy Nigeria?

​​​​​​After 46 years and multiple attempts by the Obasanjo and Jonathan administrations to end fuel subsidies, the music finally stopped on May 29, 2023.

During his inauguration speech, it fell to the new president Bola Ahmed Tinubu to step up to the podium and hit ‘stop’. Such speeches are often bland, with platitudes like “I belong to everybody, and I belong to nobody”. But this one came with a hammer – “Fuel subsidy is gone” – which shattered the peace of the long weekend.

Off to the petrol stations, many raced. But it was too late.

Many Nigerians will tell you that cheap petrol is one of the main benefits they get from the government. This is especially true because many people have to become a government unto themselves, providing their own electricity, security, education and healthcare.

Now that the benefit of cheap petrol is gone, what will replace it? What will make up the new social contract in Nigeria? This is the question the Tinubu administration must answer, and this article has some ideas about that.

The social contract

Governments survive and keep legitimacy because they can deliver benefits to their citizens, in return for the citizens obeying laws, like paying taxes. This is called a social contract, often defined as the written and unwritten bargains entered into between the government and its citizens.

Let us look quickly at a few countries and their social contracts.