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Aftermath of subsidy removal in Nigeria

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By Usman Oladimeji

Price of petrol in Nigeria has risen to above N500 per litre.

The Nigerian government has long been subsidizing fuel for its large population to cushion the effect of the rising oil prices. In the form of subsidies, the government largely covers these expenses in order to keep fuel prices more affordable for its citizens. This expense has been ongoing until the administration of President Bola Ahmed Tinubu stepped up and took a bold step to remove the fuel subsidy which was announced in his inauguration speech.

It’s worth noting that former president Muhammed Buhari had already proposed the move towards the end of his administration. The fuel subsidy is so well-liked by the public that previous administrations’ attempts to eliminate it faltered. For many Nigerians, the fuel subsidy is the federal government’s single biggest perk. Over time, however, the rising expense of continuing the subsidies has made it a significant financial drain on the government that needs to be stopped.

NLC and TUC were outraged by the subsidy removal.

In view of Nigeria current economic situation, experts also support the subsidy removal describing it has to be a massive drain on the country’s resources. However, labour’ unions like the Nigerian Labour Congress (NLC) and the Trade Union Congress (TUC), were outraged by the removal and planned a nationwide strike in response. After talks between the federal government and the labour unions in the Presidential Villa in Abuja, the strike action was eventually put off.

Despite ubiquitous public discontent, the administration has proven unwilling to back down from its plan to end the subsidies. This action against the subsidy regime is probable to aid in reducing smuggling activities, which were a major contributor to revenue losses. The porous land borders of Nigeria have made it possible for oil to be smuggled into other African countries. Smugglers are common, especially in the Niger Delta region where oil is extracted; they sabotage systems and smuggle crude oil to other countries.

Daily consumption of petrol by Nigerians reduced to 40 million.

On the other hand, getting rid of the subsidy regime would halt the corruption that has made certain people filthy rich without any kind of enterprise. It’s anticipated as well to free up the huge sum currently being spent on subsidies to boost growth in essential areas of national development like healthcare and education. This can only be accomplished if the government maintains the actual course of action and ensures the cutoff subsidy funds are well directed towards critical areas.

Since the subsidy was removed, the price of gasoline in Nigeria has risen to above N500 per litre, National Petroleum Company’s (NNPC) official pump price, with pricing variations between the states. Reducing the daily consumption of petrol by Nigerians from 65 million to 40 million was another consequence of the elimination of the subsidy. This action may help the economy in the long run, but its effects are not immediately apparent. Until then, the country’s massive poor population will undoubtedly bear the brunt. This is why policymakers are considering measures to mitigate the worst effects of subsidy cuts.

Neighbouring countries affected by Nigeria subsidy removal.

Ripple effect of Nigeria subsidy removal also went beyond to affect neighbouring countries. Cameroon, the Benin Republic, and Niger Republic are among the nearby countries where the price of petrol has practically doubled. A report by KPMG, a global accounting services company, stated that the cost of petroleum products in the Benin Republic had increased to between 700 and 800 CFA, virtually doubling from the previous price of 450 CFA. This subsequent turn of events strengthens the case that large quantities of Nigeria’s subsidized petroleum products were being smuggled into neighbouring African countries.

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