3 Years On: What Fuel Subsidy Removal Has Given — and Taken
By Lawal Dahiru Mamman
On 29 May 2023, President Bola Ahmed Tinubu declared the removal of fuel subsidy during his inaugural speech, ending what has been described as a long-standing fiscal drain that consumed trillions of naira annually and benefited importers, smugglers, and the elite more than ordinary citizens.
Three years on, the policy has delivered substantial fiscal gains through higher revenues into the Federation Account, but its results remain mixed, with questions arising especially after President Tinubu’s third anniversary speech.
Visible increases in government allocations have been matched by persistent challenges like inflation, debt-servicing burdens, and public scepticism over transparency and impact.
The subsidy removal did not create a dedicated savings account, but it eliminated massive under-recovery costs previously estimated at over ₦4–5 trillion annually pre-2023 and boosted direct remittances from the Nigerian National Petroleum Company Limited (NNPCL) to the Federation Account Allocation Committee (FAAC).
Estimates suggest ₦4–5 trillion in subsidy costs was avoided in 2023 post-inauguration, and FAAC disbursements rose sharply in the second half of the year.
In 2024, around $7.5 billion, roughly ₦12 trillion at prevailing rates, in annual savings was recorded. Total FAAC disbursements reached ₦28.78 trillion, a 79% jump from ₦16.28 trillion in 2023. States and Local Government Areas received ₦15.26 trillion, up significantly from ₦6.16 trillion in 2023.
A similar savings range of $7–8 billion was widely reported for 2025. This resulted in continued high FAAC flows, with states benefiting further. Some reports cite over ₦7 trillion. In Q1 2025, federal petroleum savings surged by over 500%, from ₦154 billion to ₦836 billion.
In general, cumulative figures often cited by the World Bank or in its projections include ₦11 trillion to around ₦20 trillion in broader gains, though naira depreciation and inflation have eroded real purchasing power. FAAC revenues have hit record nominal highs, peaking at over ₦2–3 trillion monthly, but real-term gains are lower due to macroeconomic pressures.
States have been major beneficiaries, using inflows for salary payments, debt clearance — ₦1.85 trillion reported — and some capital projects.
Funds flow into general revenues and budgets rather than a ring-fenced subsidy savings pool, making precise tracking difficult and fuelling demands for greater accountability from organisations like the Socio-Economic Rights and Accountability Project (SERAP), especially from states who are major beneficiaries.
Key Allocations and Initiatives
Palliatives and Social Support
An immediate ₦5 billion per state and the FCT was released for a mix of grants and loans for food items and fertiliser to cushion the effect of the subsidy removal.
Expansion of conditional cash transfers through the National Social Register targeting millions of households gulped ₦3.2 billion.
Student loans through the Nigerian Education Loan Fund (NELFUND) have disbursed ₦206.29 billion in loans to 1,164,222 beneficiaries since the scheme’s launch. Although NELFUND is funded by the Development Levy, the fuel subsidy removal helped create fiscal space for the government to introduce that levy and support NELFUND.
Transport and Energy Transition
Over ₦100 billion has gone into the Presidential Compressed Natural Gas (CNG) Initiative for buses, conversion centres, and infrastructure.
Infrastructure
At federal level, funding has gone to the Lagos–Calabar Coastal Highway, Abuja–Kaduna–Zaria–Kano road, Kano–Maradi rail — over 60% complete in segments — and seaport upgrades at Apapa, Tin Can, Calabar, etc., with approximately $1 billion commitment. At state level, infrastructural projects have also resumed.
In a nutshell, these critical road projects come from the National Orientation Agency’s policy document “Two Years Later: Key Benefits of Subsidy Removal”, published November 2025.
In the document, FG says over $84bn saved from subsidy removal is being channelled into 40 key road projects across the country.
Agriculture and Human Capital
Fertiliser subsidies, seeds, irrigation support, and education loans have been provided to address food security and access.
Fiscal Stabilisation and Debt
A major portion has been absorbed by debt servicing — over ₦15 trillion in budgets. The deficit narrowed from approximately 5.4% to 3.0% of GDP in one period, preventing fiscal collapse.
Challenges and Criticisms
Despite nominal revenue gains from ending the fuel subsidy regime, several issues persist:
Inflation and Cost of Living
Petrol prices rose from between ₦180–200 to over ₦1,300 per litre in across the country, driving transport and food inflation. Many households feel worse off.
Debt Servicing Trap
Much of the “savings” offsets prior borrowing patterns and rising interest costs, crowding out capital expenditure. Critics note continued heavy borrowing.
Transparency and Impact
Public and groups like BudgIT question the visible, broad-based results relative to the trillions shared. Spending is uneven, with some states focusing on urban aesthetics or payroll rather than health and education. Real-term FAAC value has declined due to inflation and exchange rates.
Partial Reallocation
While some infrastructure and reforms advanced, studies suggest limited trickle-down to productive sectors for the poorest.
Fuel queues have largely vanished, and some sectors like oil investments, certain rail and road projects show progress. The government argues the move averted bankruptcy and enabled recovery.
Bottom Line
Three years after subsidy removal, Nigeria has gained significant fiscal space, freeing up trillions that previously vanished into an inefficient system. This has supported higher allocations, some infrastructure restarts, social programmes, and stabilisation.
However, high inflation, debt burdens, naira pressures, and implementation gaps have muted benefits for ordinary citizens. The core challenge remains effective, transparent reallocation toward infrastructure, human capital, and pro-poor investments.
Stronger accountability, better tracking of projects, and sustained reforms are essential for the policy to deliver lasting transformation rather than just fiscal relief for governments.
Public trust hinges on delivering tangible improvements in living standards amid the sacrifices made. As debates continue in 2026, the results underscore both the necessity of the reform and the difficulty of translating savings into widespread prosperity.