ABUJA, Nigeria — The Federal Government has said the removal of petrol subsidy by President Bola Ahmed Tinubu has ended a longstanding economic drain, saving Nigeria over $84 billion and enabling the financing of at least 40 major road projects nationwide within two years.
This was revealed in a policy document titled “Two Years Later: Key Benefits of Subsidy Removal”, published by the National Orientation Agency (NOA) and obtained by journalists in Abuja.
According to the report, the subsidy removal policy, introduced on May 29, 2023, the day President Tinubu assumed office, has helped to avert economic collapse and recalibrate Nigeria’s fiscal priorities by reducing debt servicing pressure and increasing capital investments across the country.
“For decades, particularly since the start of Nigeria’s Fourth Republic, the fuel subsidy regime drained public finances. Between 2005 and 2022 alone, $84.39bn was spent on fuel subsidies. In 2022, the subsidy budget surged by over 700% to N4tn, pushing the country to the brink of insolvency,” the document stated.
Subsidy Removal Triggered Fiscal Recovery
The report emphasized that by eliminating the fuel subsidy, Nigeria transitioned from consuming over 70% of its potential revenue on subsidy payments to redirecting those funds into critical infrastructure and economic recovery plans.
It noted that the Federal Government’s bold move has had a ripple effect across all tiers of government.
“Subsidy removal not only saved Nigeria from imminent financial collapse but also gave financial breathing room to state governments. Many states that previously struggled to pay salaries now meet payroll obligations promptly, even after more than 100% increases in minimum wage,” the NOA stated.
In 2023, the 36 states and 774 LGAs received N6.16tn in FAAC allocations — a 28.6% increase from N4.79tn in 2022. By 2024, this figure soared to N15.26tn, with states and LGAs receiving N9.58tn, thanks to revenue inflows freed up by subsidy removal.
Debt Reduction and Infrastructure Boom
The Federal Government stated that the policy has helped slash the domestic debt of states, which dropped from N5.82tn in June 2023 to N3.97tn by December 2024 — a reduction of N1.85tn in just 18 months.
Subsidy savings have also been used to:
Clear $7bn foreign exchange (FX) backlog owed to foreign airlines and businesses
Pay off N7tn Ways and Means advances
Repay $3.26bn IMF loan ahead of schedule
Raise external reserves from $35bn in May 2023 to $38.9bn as of March 2025
Reduce the debt service-to-revenue ratio from 97% in 2023 to 68% in 2024
Capital Expenditure Surpasses Recurrent Spending
For the first time in decades, capital expenditure in the 2025 Appropriation Act has overtaken recurrent spending. According to the NOA, the 2025 budget allocates N23.96tn to capital expenditure compared to N13.64tn for recurrent costs.
“This marks a major policy shift. Successive governments allocated up to 70% of their budgets to recurrent items. The Tinubu administration has reversed this to prioritize real development,” the NOA noted.
Among the high-impact projects being funded are the Lagos-Calabar Coastal Highway, East-West Road, Enugu-Abakaliki-Ogoja Highway, Mambilla Hydropower Project, Sokoto-Badagry Super Highway, and the Eastern Railway Corridor.
Boost to Social Sectors and Job Creation
Subsidy savings have also enabled the Federal Government to:
Launch the Nigerian Education Loan Fund with N203bn for interest-free student loans
Expand Compressed Natural Gas (CNG) adoption to reduce fuel costs
Increase investment in healthcare, housing, digital economy, and solid minerals
Criticism and Government’s Justification
Despite the stated gains, the subsidy removal has not come without criticism. Many Nigerians have decried the spike in fuel prices, rising inflation, and cost-of-living hardship that followed the policy.
Still, the Federal Government defended its decision, insisting that the long-term benefits far outweigh the short-term pain.
“It’s like a woman in labour. There is pain now, but eventually, Nigerians will reap the rewards of a restructured and revitalized economy,” the NOA concluded.
