National Orientation Agency (NOA) has said that subsidy removal on Premium Motor Spirit (PMS), also known as petrol, has culminated in the generation of more than $84 billion (approximately N130.9trn at exchange rate of N1558/$) the federal government.
The agency said the funds generated have enhanced the funding 40 critical road projects across the country in the past two years.
In his inaugural address on May 29, 2023, President Bola Ahmed Tinubu unveiled a bold and transformative policy designed to alleviate the mounting financial pressures on Nigeria’s government.
“Fuel subsidy is gone,” Tinubu announced, sending a clear message of his administration’s commitment to economic reform during his inaugural speech.
For years, the subsidy, introduced in the 1970s, has been a contentious issue.
Despite Nigeria’s status as Africa’s largest oil producer, the country struggles to refine enough crude oil to meet local demand.
As a result, Nigeria imports most of its petroleum products, which were sold at subsidized rates set by the government.
While the subsidy kept fuel prices artificially low for consumers, it placed an enormous strain on public finances.
In 2022 alone, the subsidy consumed a staggering 4.3 trillion naira. For the first half of 2023, another 3.36 trillion naira had already been earmarked for subsidy payments.
But, the president came under heavy criticism for the manner in which he announced the removal of subsidy on fuel.
Nigerians had said Tinubu should have put in place modalities that would cushion the effect of the subsidy removal before making the announcement.
In its policy explainer — Two Years Later: Key Benefits of Subsidy Removal – NOA, stated:
“For decades, particularly since the advent of the current democratic dispensation, a major albatross of the Federal Government had been the oil subsidy regime.
“Successive administrations’ zeal to tame the menace had proved a fiasco while the economy continued to haemorrhage profusely.
“However, by 2015, many Nigerians had reached a consensus that it was high time the subsidy was consigned to the dustbin of history, as the subsidy budget in 2022 rose by 700 per cent to N4tn, the highest ever in subsidy history.
“Between 2005 and 2022, successive governments spent $84.39bn on fuel subsidies. These subsidies consumed over 70 per cent of potential federal revenue, pushing the country to the brink of bankruptcy. But with the bold decision to remove it, Nigeria is now saving billions and investing in real infrastructure.
“Removal of subsidy not only saved the entire economy from imminent collapse, it also rescued several states of the federation from bankruptcy.
“Upon the take-off of this incumbent administration, Nigeria was spending 97 per cent of its revenues to service debts until its debt profile exceeded N100tn.
“Fuel subsidies consumed more than 70 per cent of the potential Federal Government’s revenue, forcing both the central and state governments to resort to heavy borrowings to finance their budgetary expenditures, but the removal helped the country to save billions.”
It stated: “States now swim in inflows of funds, paying salaries as at when due despite more than 100 per cent minimum wage increase and drastically reducing their debt portfolios because subsidy removal puts more money into their hands.
“In 2023, the 36 states of the federation and 774 local government areas got a total of N6.16tn as FAAC allocations, implying a 28.6 per cent increase from the N4.792tn they received in 2022, but in 2024, revenues rose astronomically to N15.26tn as a result of subsidy withdrawal, giving the states and 774 LGAs N9.58tn, which was N3.42tn higher than what they received in 2023.
“Thus, as records from the Debt Management Office have shown, in the last 18 months, the total domestic debt profile of the 36 states and FCT had declined from N5.82tn in June 2023 to N3.97tn in December 2024. This implies that subnational administrations had repaid N1.85tn debts within one and a half years.”
It also stated: “As part of the gains of subsidy withdrawal, for the first time in decades, Nigeria’s capital expenditure in the 2025 Appropriation Act is higher than its recurrent annual spending. Successive administrations had always allocated 70 per cent of their annual budgets to recurrent spending, leaving only a paltry 30 per cent for the capital budget.
“However, the incumbent administration provides N23.96tn for capital expenditure in the 2025 budget. This is N10tn higher than N13.64tn for recurrent expenditure.
” The impacts of investments in road infrastructure have been the ongoing commissioning of 40 road projects in commemoration of two years of President Tinubu’s administration.”
