On May 29, 2023, in a historic moment during his inaugural address, President Bola Ahmed Tinubu declared an end to Nigeria’s decades-long fuel subsidy policy. Framed as an unsustainable fiscal burden, the Tinubu administration presented the move as a pivotal step toward economic reform and national development. Two years later, Nigeria stands at an economic and political crossroads. The decision, praised by global financial institutions, has also sparked widespread public dissatisfaction and socio-economic dislocation.
This report provides a comprehensive analysis of the consequences of subsidy removal across Nigeria’s economy, polity, and society. Drawing on public records, expert commentary, and statistical analysis, we assess what has been gained, what has been lost, and what paths lie ahead for Africa’s largest economy.
Situation Before Subsidy Removal
Fuel subsidies in Nigeria date back to the 1970s, instituted to cushion citizens from the volatility of global oil prices. Over time, they became both a symbol of social welfare and a lightning rod for corruption. By 2022, fuel subsidies cost Nigeria over ₦4.39 trillion (approx. $9.7 billion USD) annually — more than the combined budgets for health and education.
President Tinubu’s abrupt announcement ended this regime overnight. The rationale was clear: Nigeria could no longer afford to finance fuel subsidies while battling rising debt, dwindling oil revenues, and a fragile naira. While the fiscal logic was sound, the execution sparked backlash. Political parties, labour unions, and civil society groups criticized the absence of a clear social protection plan and the lack of stakeholder engagement.
The leading opposition parties, the People’s Democratic Party (PDP) and the Labour Party (LP), condemned the move. For instance, PDP chieftain Emeka Eze, during an interview with Vanguard newspaper, described the decision as “unnecessary,” cautioning that it could trigger economic panic. Debo Ologunagba, PDP spokesperson, criticised the absence of a comprehensive rollout plan in his press release. The Labour Party echoed similar sentiments, accusing the government of insensitivity and lack of preparedness.
The Nigerian Labour Congress (NLC) and Trade Union Congress (TUC) organised protests and threatened nationwide strikes. Nigerians faced immediate hardships as fuel prices skyrocketed. From a regulated pump price of ₦185 (approx. $0.40) per litre, rates soared to over ₦500 (approx. $1.08) in major cities and as high as ₦600 (approx. $1.30) in rural areas. Panic buying, fuel hoarding, and supply disruptions followed. Today, the Nigerian National Petroleum Company Limited (NNPCL) sells petrol at over ₦910 (approx. $1.96) per litre — a staggering 391.89% increase.
Economic Ripples and Inflationary Pressures
The removal of fuel subsidies was projected to save over ₦4 trillion (approximately $8.6 billion USD) annually. The government pledged to redirect these funds toward infrastructure, education, healthcare, and targeted palliatives. However, the benefits remain largely intangible to the average Nigerian. By late 2024, inflation had surged past 33%, with food and transportation costs driving the increase.
Wages have stagnated and living standards have dropped. Commuting costs have doubled or even tripled across the country. For example, bus fares from Lagos to Ibadan rose from ₦2,000 to ₦6,000 (approximately $2 to $4.75). Traders, civil servants, and students report making daily sacrifices to cope with relentless price hikes.
Small and medium-sized enterprises are grappling with rising operational costs that threaten their survival.Running a petrol station used to be tough — now it’s nearly impossible,” said Mr. Michael Ogunesan, a fuel dealer in Lagos. “With ₦40 million(approximately $86,000 USD), I could keep my tanks filled and my business moving. Today, if you don’t have ₦300 million(about $645,000 USD), you’re out of the game. Fuel is available, yes—but affordability and survival are a different matter. Similarly, Mrs. Aminat Adewale, who runs a frozen food store in Oshodi, say electricity costs and transport fuel are choking profit margins.
Many business owners have been forced to shut down or adopt collective purchasing schemes simply to stay afloat. This financial squeeze on small businesses continues to erode employment opportunities and weaken local economic resilience.
The federal government has also faced criticism for continuing to pay subsidies indirectly. The Nigerian National Petroleum Company Limited (NNPCL) maintains fixed domestic pump prices that do not reflect prevailing international fuel costs. As a result, this pricing gap has compelled NNPCL to accumulate debts and resume subsidy payments, effectively covering the difference between market rates and retail pump prices.
Former Kaduna State Governor, Nasir El-Rufai, added weight to these claims, asserting that the federal government is now spending more on fuel subsidies than it did before the official removal. He explained that the adverse effects of the initial withdrawal necessitated a quiet reintroduction of subsidies. “The federal government is now subsidizing fuel; many people don’t know this. It is the right policy,” El-Rufai stated. His comments have reignited public scepticism, raising a fundamental question: Is the subsidy truly gone—or has it merely changed form?
What Has Worked?
Despite the hardship, the deregulation of the downstream oil sector has yielded measurable progress. Fuel availability has improved, and the endemic smuggling of subsidized fuel into neighbouring countries has declined. This development has bolstered regional energy security and curtailed illegal cross-border trade.
Perhaps the most significant gain is the stimulation of private sector investment in refining. The commissioning of the Dangote Refinery, Africa’s largest, marked a historic milestone. Other modular refineries have emerged in states like Edo, Abia, and Anambra. The impending entry of the BUA Refinery will further drive competition and local production capacity. These developments are expected to reduce Nigeria’s reliance on imported petroleum products and strengthen the naira.
International institutions such as the World Bank and the International Monetary Fund (IMF) have praised the subsidy removal as a bold step towards fiscal discipline. The World Bank projects that Nigeria’s economy will grow by 3.6% in 2025, a slight increase from the estimated 3.3% growth in 2024. Nigeria’s early repayment of a $3.4 billion emergency loan from the IMF in 2025 underscored the country’s improved debt management credentials.
Revenue Allocation and Fiscal Reforms
Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, stated that Nigeria has saved $20 billion through the removal of the petrol subsidy and the implementation of a market-driven foreign exchange regime. The fiscal benefits of subsidy removal have manifested in increased monthly disbursements from the Federation Account Allocation Committee (FAAC). Under Tinubu, allocations tripled from ₦760 billion (approx. $1.63 billion) in 2023 to ₦3.2 trillion (approx. $6.9 billion) in 2024. States received a record ₦5.3 trillion (approx. $11.3 billion) in federal allocations, up 74.76% from the previous year. Oil-producing states benefitted significantly, with derivation funds rising from ₦454.7 billion (approx. $976 million) in 2023 to ₦1.135 trillion (approx. $2.44 billion) in 2024.
In contrast, under President Buhari, FAAC disbursements remained subdued, and the revenue-sharing formula was static. The Tinubu administration has demonstrated a more aggressive fiscal posture, prioritizing state capacity and subnational fiscal autonomy.
The success of Nigeria’s fuel market deregulation depends heavily on domestic refining capacity. Though the Dangote Refinery has started production, government-owned refineries remain largely dysfunctional. The pressure is mounting for the rehabilitation of government-owned refineries — not only to stabilize fuel prices but also to reactivate abandoned NNPC depots and create jobs.
Charting the Path Forward
Two years into this policy shift, Nigeria’s path forward demands strategic recalibration. At the forefront is the need for transparent and accountable use of the ₦4 trillion saved annually from subsidy removal. Publishing audited reports and breaking down spending across sectors would help restore public trust and demonstrate the government’s commitment to reform-driven development.
Equally vital is the revitalization of public refineries. While private-sector investments — such as those behind the Dangote and BUA refineries — are promising, state-owned facilities must also be restored to productive use. This will not only boost local refining capacity and reduce reliance on imports but will also help lower prices and stimulate job creation in the energy sector.
Social safety nets must be substantially strengthened to address the widening inequality and hardship brought on by inflation. Programs like cash transfers, mass transit support, and food subsidies need to be scaled and better targeted to reach those most affected by rising costs.
In parallel, a robust strategy to enhance domestic production and promote the export of refined petroleum products could position Nigeria as a net exporter, reduce pressure on foreign reserves, and improve trade balances. To support all of these efforts, strong institutional oversight is essential. Agencies like the EFCC and ICPC must be empowered to ensure transparency and curb any emerging corruption within the deregulated fuel market.
Author Bio: Olaoluwa Vincent Ajayi serves as the Economic Correspondent for New Daily Prime, with a focus on energy policy, political affairs, fiscal reform, and economic development in both West Africa and Europe.
