On May 29, 2023, President Bola Tinubu, in his inaugural speech as President of the Federal Republic of Nigeria, made a landmark declaration: “Subsidy is gone.” With that single phrase, he signaled the end of the petrol subsidy regime in Nigeria. While subsidies on diesel and kerosene had already been removed by the previous administration, petrol remained untouched due to anticipated widespread economic impacts. The fuel subsidy, long seen as a populist tool, had become financially unsustainable.
The Origins of Fuel Subsidies
Nigeria began subsidizing fuel in the 1970s in response to the global oil crisis sparked by the Israeli-Arab war. Although the surge in oil prices created a financial windfall for the country, local refining capacity lagged behind national demand. At that time, Nigeria had only one refinery — the Old Port Harcourt Refinery, commissioned in 1965 with a capacity of 60,000 barrels per day.
Additional refineries followed, including Warri (1978), Kaduna (1980), and a second Port Harcourt refinery (1989). The subsidy policy was formally embedded in law with the 1977 Price Control Act, which made it illegal to sell certain goods, including petrol, above regulated prices.
Pre-Removal Landscape: A System Riddled with Corruption
Over the decades, the subsidy system became a hotbed of corruption. The administration of President Goodluck Jonathan witnessed severe allegations of fraud in subsidy payments, especially due to Nigeria’s dependence on imported refined fuel.
Turnaround maintenance of local refineries was often promised but rarely fulfilled. As of 2023, only two of the four national refineries operated at minimal capacity — barely reaching 50% utilization.
In 2012, the House of Representatives revealed that over $6 billion had been misappropriated through fraudulent subsidy claims. A committee chaired by Hon. Farouk Lawan was formed to investigate, but the effort was later tainted by bribery scandals involving Lawan himself and another committee member, Emenalo Boniface.
Despite public outcry and protests, including a general strike, the Jonathan administration partially reinstated the subsidy after initially removing it on January 1, 2012, raising petrol prices from ₦65 to ₦140 per litre. Public pressure forced a reduction to ₦97.
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Post-May 2023: The Pains Begin
Although many Nigerians acknowledged the need to end fuel subsidies, there was no consensus on how or when to implement the policy. The abrupt announcement by President Tinubu triggered economic shockwaves.
Labour Party’s 2023 presidential candidate, Mr. Peter Obi, likened the process to removing a tooth without anesthesia — arguing that while the removal was necessary, the execution lacked empathy.
Spiraling Costs and Rising Hardship
Since the subsidy removal, virtually every sector has felt the impact. The cost of living has risen sharply, and job losses have intensified.
Alhaji Haruna Danjuma, National President of the National Parent Teacher Association of Nigeria (NAPTAN), noted the strain on families. “Many parents are struggling. Some have lost their jobs, and students can no longer afford basic upkeep,” he said, pointing out that the new student loan scheme is not sufficient to meet demand.
Former National President of the National Association of Nigerian Students (NANS), Comrade Lucky Emonefe, acknowledged the provision of Compressed Natural Gas (CNG) buses but insisted more is needed.
Transport costs have surged, with fares from Lagos to Ibadan rising from ₦1,000–₦1,500 to ₦5,000 per trip. The financial burden has forced people to cut back on travel, leading to a noticeable decrease in city traffic.
The High Cost of Doing Business
For petrol station owner Mr. Soji Ogunesan in Lagos, the new operating reality is daunting. “Starting a filling station used to cost around ₦40 million. Now, it requires over ₦300 million,” he said. Many stations now share fuel deliveries due to high upfront costs and falling demand.
The Gains: Silver Linings in a Tough Transition
Despite widespread hardship, the subsidy removal has brought some benefits.
1. Curbing Smuggling – Fuel smuggling into neighbouring countries — including Niger, Chad, and Cameroon — has declined. Nigeria’s artificially low fuel prices previously encouraged cross-border black markets. The new pricing regime has disrupted that trade.
2. Increased Government Revenue – Monthly allocations to the three tiers of government have more than doubled. What used to average ₦600 billion now exceeds ₦1.3 trillion. This has boosted the financial standing of federal, state, and local governments — though concerns remain about how well the funds are utilized.
3. Emergence of Local Refineries – The Dangote Refinery — the largest in Africa — has started production. Several modular refineries have also emerged in states such as Edo, Abia, and Anambra. While most currently produce diesel, petrol production is expected to follow.
The BUA Refinery, owned by industrialist Abdul Samad Rabiu, is also poised to enter the market, potentially increasing competition and stabilizing prices. So far, fuel availability has improved, and long-standing fuel queues have diminished.
Calls to Revive Government Refineries
The successful operation of private refineries has intensified pressure on the government to rehabilitate state-owned ones. Nigerians are questioning why privately funded refineries thrive while government facilities remain dormant.
Reviving these refineries would create jobs, reduce fuel prices, and rejuvenate abandoned NNPC depots across the country.
What’s Next for Nigeria?
The long-term goal is to transform Nigeria into a net exporter of refined petroleum products. This would conserve foreign exchange, which is currently depleted by fuel imports consuming nearly 60% of forex earnings.
To realize this goal, continued investment in local refining, improved infrastructure, and transparent governance are critical. Strategic planning is also necessary to ensure that revenue gains from subsidy removal are effectively deployed to improve citizens’ welfare.
Two years after subsidy removal, Nigeria is grappling with both the costs and the opportunities of economic reform. While the pains are real and widespread, the gains — particularly in revenue, refinery investment, and reduced smuggling — offer a glimmer of hope. The challenge for the government is to cushion the impacts on citizens while accelerating reforms to build a more self-sufficient and equitable economy.
