Politics

Subsidy Removal: A Good Policy, Poorly Executed

Published by Akinwale Fakinlede on August 26th, 2025.

Few policies ignite as much public debate as the removal of subsidies, particularly in developing economies where fuel and food prices directly affect the cost of living. In principle, subsidy removal is a sound economic strategy. It reduces government spending, curtails corruption often associated with subsidy regimes, and redirects scarce resources toward long-term development priorities such as infrastructure, education, and healthcare. However, while the idea is commendable, its execution has often been flawed, leaving citizens to bear the brunt of poor planning and inadequate cushioning measures.

Why Subsidy Removal Makes Economic Sense

Subsidies are intended to make essential goods affordable, but in practice, they frequently benefit the wealthy more than the poor. For example, fuel subsidies tend to favor those who own multiple cars and consume more fuel, rather than the average low-income earner. Additionally, subsidies drain public finances, sometimes consuming billions of dollars annually—resources that could otherwise be invested in sectors that create jobs and foster economic growth.

From an economic standpoint, phasing out subsidies can help stabilize government budgets, encourage efficient resource use, and promote market-driven pricing. In the long run, this creates a more resilient economy.

The Problem of Poor Implementation

While the theory is sound, the practice often falls short. In many cases, subsidy removal has been rushed without sufficient preparation or public sensitization. Governments have failed to put in place robust safety nets to protect vulnerable populations from the immediate shock of rising prices. As a result, instead of celebrating fiscal prudence, citizens experience sudden hardship, inflationary pressures, and declining purchasing power.

A major flaw in implementation is the absence of transparency. Citizens are rarely shown clear evidence of how the savings from subsidy removal are being redirected. When governments promise to reinvest these funds in public infrastructure or social programs, the impact is often invisible or delayed, fueling distrust.

The Human Cost

For ordinary people, the consequences are stark. Transportation costs rise almost overnight, food prices soar, and small businesses struggle to cope with higher operating expenses. Without targeted interventions such as cash transfers, subsidized public transport, or investments in renewable energy alternatives, the poorest citizens end up paying the highest price for reforms meant to benefit the nation.

This disconnect between policy intention and lived reality often sparks protests, strikes, and political instability—ironically undermining the very economic growth the policy was meant to promote.

Lessons for Policymakers

The key lesson is clear: subsidy removal must be gradual, transparent, and accompanied by strong social protection mechanisms. Governments should invest in clear communication strategies that build trust and explain the benefits of reform. More importantly, they must ensure that savings from subsidy cuts are visibly and accountably channeled into sectors that directly improve citizens’ lives.

Conclusion

Subsidy removal remains a good policy on paper, but execution determines whether it succeeds or fails. Without thoughtful implementation, what could have been a step toward economic stability becomes a source of hardship and disillusionment. For reforms of this magnitude, the difference between success and failure lies not in the policy itself, but in

the way it is carried out.