Petrol Subsidy Removal Yields $84 Billion Gain, Funds 40 Roads – But at What Cost to Nigerians?
In a bombshell policy explainer titled “Two Years Later: Key Benefits of Subsidy Removal”, the National Orientation Agency (NOA) asserts that President Bola Tinubu’s bold decision to scrap Nigeria’s petrol subsidy on 29 May 2023 rescued the nation from imminent economic collapse, freeing up over $84 billion to bankroll 40 critical road projects and shore up state finances.
Yet, as the administration trumpets this fiscal victory, ordinary Nigerians continue to grapple with the fallout of skyrocketing pump prices and rampant inflation.
A Historic Drain on Federal Finances
For nearly two decades, fuel subsidies have shackled Nigeria’s public coffers. Between 2005 and 2022, successive governments poured $84.39 billion into artificially suppressing petrol prices—monies that consumed over 70 per cent of potential federal revenue and pushed the country to the brink of bankruptcy.
By 2022 alone, the subsidy budget ballooned by 700 per cent to ₦4 trillion, the highest in Nigeria’s history.
The removal of this millstone, NOA maintains, has been the linchpin for settling long-overdue obligations, ramping up capital expenditure and granting states unprecedented fiscal autonomy.
No longer chained to the subsidy regime, the Tinubu administration has redirected billions towards infrastructure, education, healthcare and debt-service obligations.
Roads to Prosperity: 40 Projects Underway
One of the most tangible fruits of subsidy abolition has been the commissioning of 40 road projects, marking the largest single-phase road drive in decades.
Among these are landmark arteries such as the Lagos–Calabar Coastal Highway, East–West Road, Enugu–Abakaliki–Ogoja Highway, Sokoto–Badagry Super Highway and sections of the Eastern Rail corridor.
These roads, some still under construction, promise to unlock regional markets, reduce logistics costs and weave together Nigeria’s fractious geopolitical zones.
Moreover, the newly established Renewed Hope Infrastructure Development Fund, with a ₦20 trillion seed capital, underscores the administration’s commitment to sustaining capital outlays beyond the lifespan of the subsidy windfall.
For the first time since the return of democracy in 1999, capital expenditure in the 2025 Appropriation Act (₦23.96 trillion) outstrips recurrent spending (₦13.64 trillion)—a stark reversal of the past, when governments allocated 70 per cent to wages and only 30 per cent to development.
States Rescued from Bankruptcy
Tinubu’s axe to the subsidy has not only fortified the centre but resuscitated subnational economies. In 2024, the 36 states and the FCT received ₦15.26 trillion in FAAC allocations—an astronomical leap from ₦4.79 trillion in 2022 and ₦6.16 trillion in 2023.
This deluge of funds enabled states to honour salary obligations despite a 100 per cent minimum-wage hike and to pare down debts.
Indeed, the Debt Management Office records show a decline in total domestic debt for states and the FCT from ₦5.82 trillion in June 2023 to ₦3.97 trillion in December 2024—implying ₦1.85 trillion in repayments within 18 months govserv.org.
For administrations hitherto hamstrung by recurrent borrowings, this is nothing short of a fiscal renaissance.
Clearing Foreign-Exchange Backlogs and Shoring External Reserves
Subsidy savings have also tackled Nigeria’s notorious foreign-exchange logjam. The government cleared a $7 billion backlog owed to foreign airlines and suppliers—once the largest in the world—and lifted Nigeria’s status as the global champion of FX arrears.
Thanks to this clean-up, external reserves swelled from $35 billion in May 2023 to $38.9 billion in March 2025, even after aggressive interventions to stabilise the naira.
Additionally, Tinubu’s administration has squared off ₦7 trillion in Ways and Means debt and settled a $3.26 billion IMF loan ahead of schedule, driving down the debt-service-to-revenue ratio from 97 per cent in 2023 to 68 per cent in 2024.
These strides, NOA argues, would have been unthinkable under the subsidy regime.
Beyond Roads: Education, Health and Energy Transformed
The subsidy dividend extends into softer pillars of development. The Nigerian Education Loan Fund has been capitalised with ₦203 billion to offer interest-free loans to university students—an unprecedented social-welfare initiative.
The Compressed Natural Gas (CNG) rollout, under a ₦100 billion grant, is reducing transport costs and curbing carbon emissions, while solid-minerals reforms and health-sector funding are laying the groundwork for diversified growth.
Critical Counterpoint: The Citizen’s ‘Labour Pains’
Yet, for all these macro-economic triumphs, the subsidy purge has exacted a heavy toll on households. Petrol pump prices more than doubled overnight, ratcheting up logistics costs for goods and services.
No wonder inflation reached 34.8 per cent in December 2024—nearly 10 points above the 2025 budget’s projection of 15.75 per cent.
Even more disquieting, headline inflation averaged 34.6 per cent in November 2024, according to the Centre for the Promotion of Private Enterprise (CPPE).
Housewives in Lagos lament soaring market prices, transport unions decry extortionate fares, and small businesses grapple with razor-thin margins.
Opposition parties and civil-society groups warn that without adequate palliatives, the subsidy removal risks deepening poverty and stoking social unrest.
Economists caution that high inflation could persist through most of 2025, easing only to around 27.1 per cent by year-end—still triple the Central Bank’s 6–9 per cent target.
And while some analysts predict a drop to 15 per cent by December 2025 on a favourable base effect, these projections hinge on stable forex and successful CPI rebasing.
The Labour Analogy: From Pain to Renewal?
NOA likens the subsidy removal saga to “a woman in labour,” whose agonies precede the joy of new life. Indeed, the reforms have unlocked historic savings and unprecedented infrastructure investment.
But childbirth is not pain-free, and without robust social safety nets, the present discomfort may leave indelible scars on vulnerable Nigerians.
True fiscal metamorphosis demands a calibrated approach: targeted palliatives for the poorest, acceleration of refinery and CNG projects to ease transport costs, and transparent tracking of infrastructure deliverables.
Otherwise, the very citizenry whose hardship the reforms were meant to address may become collateral damage.
Conclusion: A High-Stakes Gamble
President Tinubu’s decision to consign petrol subsidy to history was arguably overdue. The haemorrhage of federal revenues had become unsustainable; the subsidy benefited a wealthy few while impoverishing the nation.
Yet, the success of this high-stakes gamble will be measured not solely in road-kilometres or debt ratios but in improved living standards for ordinary Nigerians.
Two years on, the initial scoreboard glows with fiscal triumphs: $84 billion saved, 40 roads underway, ₦20 trillion infrastructure fund, and receding state debts. But the final verdict remains pending.
Will Nigerians soon witness the “new life” promised by NOA, or will the current austerity cement long-term hardship?
As the nation stands at this economic crossroads, the Tinubu administration must ensure that its reforms deliver not just raw numbers, but real-world relief.
The coming months—through palliative measures, effective deployment of infrastructure, and macro-stabilisation—will determine whether the petrol subsidy purge is recorded as a watershed moment or a cautionary tale in Nigeria’s fiscal annals.
Atlantic Post writers Taiwo Adebowale, Osaigbovo Okungbowa & Peter Jene contributed to this report.
