Two years after the removal of petrol subsidies, the Federal Government says Nigeria has turned the corner on what it calls a “historic financial drain,” unlocking over $84 billion in savings that have been redirected into critical infrastructure and economic stability initiatives.
According to a detailed policy document published by the National Orientation Agency (NOA), the elimination of fuel subsidies on May 29, 2023, has helped the country avert economic collapse, repay significant debts, improve state-level financial autonomy, and finance major infrastructure projects nationwide. The document, titled “Two Years Later: Key Benefits of Subsidy Removal”, outlines the government’s position on how the tough reform has begun to yield measurable dividends.
While the decision sparked widespread debate and initial economic hardship, the NOA said it marked a necessary reset. “Subsidy removal not only saved the entire economy from imminent collapse, it also rescued several states of the federation from bankruptcy,” the agency stated. Before the reform, Nigeria was spending up to 97% of its revenue servicing debt, with over 70% of federal revenue going toward subsidies.
Between 2005 and 2022, successive governments reportedly spent $84.39 billion on fuel subsidies, peaking at ₦4 trillion in 2022. The Tinubu administration argues that ending the practice allowed resources to be redirected toward capital expenditure, debt repayment, and infrastructure upgrades.
One key highlight is the dramatic rise in capital expenditure. For the first time in decades, Nigeria’s 2025 budget allocates more to capital projects (₦23.96 trillion) than to recurrent spending (₦13.64 trillion). This shift has allowed for the launch and commissioning of 40 major road projects in just two years, as well as the establishment of the ₦20 trillion Renewed Hope Infrastructure Development Fund to drive flagship national projects like the Lagos-Calabar Coastal Highway and the Eastern Rail Corridor.
Beyond infrastructure, the NOA notes that subsidy savings helped clear a $7 billion foreign exchange backlog owed to international airlines and businesses, reduce Nigeria’s debt service-to-revenue ratio from 97% in 2023 to 68% in 2024, and increase foreign reserves from $35 billion in May 2023 to $38.9 billion by March 2025.
States, too, have seen a fiscal turnaround. Monthly allocations to state and local governments reportedly jumped from ₦4.79 trillion in 2022 to ₦15.26 trillion in 2024, enabling many to pay salaries promptly, despite wage hikes, and to reduce their debt burdens. According to the Debt Management Office, total domestic debt for the 36 states and the FCT fell by ₦1.85 trillion between June 2023 and December 2024.
Education and social investment are also highlighted as beneficiaries. The government has seeded the Nigerian Education Loan Fund with over ₦203 billion for interest-free student loans and is expanding compressed natural gas (CNG) rollouts to cushion transport costs for Nigerians.
Despite these gains, critics argue the policy has pushed inflation and deepened citizen hardship, particularly in the short term. However, the government likens the situation to “a woman in labour” whose pain precedes new life, insisting the nation is already seeing the benefits of this difficult but necessary economic adjustment.
The NOA maintains that the reform was unavoidable and is foundational to rebuilding the economy for long-term growth and resilience.