Fuel Subsidy Savings: A Lifeline for Nigerians or Another Lost Opportunity

Amid the World Bank’s call for accountability, Nigeria must urgently review the deployment of fuel subsidy savings to improve citizens’ lives, writes Festus Akanbi

There is no doubt that Nigerians are not smiling, although both federal and state governments are ‘parroting’ that life is getting better. However, the reality is that stripped of fuel subsidy, ordinary Nigerians now stagger under rising transport fares and soaring food prices, their dreams crushed beneath relentless hardship.

The government promised to channel savings from fuel subsidy removal to infrastructure development, education, healthcare, and job creation, using these funds to improve public services and stimulate economic growth.

It added that measures were being considered to mitigate the impact of rising fuel costs on vulnerable populations through cash transfer programmes and targeted subsidies.

Today, however, the promised relief from subsidy savings remains a cruel mirage, as state governments, swollen with increased federal allocations, offer no trace of tangible progress, no better schools, no improved healthcare, and no stable power. Instead, funds vanish into opaque bureaucracies, while families ration meals, students study in darkness, and the sick die in neglected hospitals.

In this bleak reality, the masses, once hopeful for a better life, are left to wonder if the sacrifice they were forced to make was merely fuel for another cycle of betrayal.

In other words, the subsidy removal, which was initially intended to alleviate the financial burden on citizens, has become unbearable and harsh.

The rise in fuel prices triggers inflationary pressures, erasing the purchasing power of citizens and reducing their standard of living. Due to the hike in fuel prices, there is an automatic increment in transport fares, which many transporters have taken advantage of, causing inconvenience for Nigerians, despite the harsh living conditions.

The media is awash with reports of an increase in the federal allocations to states in the wake of the 2023 removal of the fuel subsidy. Although the process began gradually, however, in October 2024, the federal government fully removed the petrol subsidy, a move expected to save approximately 2.6% of the country’s GDP in 2024.

 However, the Nigerian National Petroleum Company Limited (NNPCL) began transferring the resulting revenue gains to the Federation Account only in January 2025 and has since been remitting only about 50% of these gains. The remaining funds are being used to offset past arrears and other obligations.

Dashed Expectations

Despite the increase in revenue as a result of the savings from subsidy removal, Nigeria’s infrastructure stands as a tragic portrait of neglect and decay as a flickering power supply plunges homes and businesses into darkness, while energy costs cripple industries struggling to survive. Roads, the lifelines of commerce, are riddled with death traps-cratered, waterlogged, and haunted by armed bandits preying on helpless travellers.

Hospitals, mere shells of healing centres, are choked with rusted equipment, exhausted staff, and medicine shortages, leaving the sick to suffer or die in despair. Security is a faint promise, with citizens at the mercy of kidnappers and robbers who strike at will.

Despite the billions saved from fuel subsidy removal, funds that should have revived these critical sectors, the nation’s infrastructure remains a brutal testament to mismanagement and betrayal, leaving the masses to grope through the ruins of broken promises.

This has continued to raise a fundamental question about what has happened to the savings from the subsidy removal so far, from the camp of economic analysts.

Full Disclosure

It was under this disappointing scenario that the call by the World Bank for the complete transfer of revenue gains from the total removal of fuel subsidy into the Federation Account came as a sad reminder of the state of things in the country.  

The multilateral institution recalled that despite the full subsidy removal in October 2024, the NNPCL started transferring the revenue gains to the federation only in January 2025. The bank stated that resolving any remaining net arrears and channelling the full benefits of subsidy reform to the Federation Account was critical for sound fiscal management.

The recommendations were contained in the World Bank Nigeria Development Update (NDU), which was launched in Abuja last Monday.

Analysts believe the full remittance of subsidy savings to the Federation Account would allow for transparent tracking and equitable distribution of funds among the federal, state, and local governments. This transparency is crucial for sound fiscal management and for building public trust in government financial operations.

With the report that the NNPCL was only declaring 50 per cent of the savings to the Federation Account, there are concerns that the opacity in the disclosure will hurt the economy and make the implementation of the 2025 budget difficult, especially in the current circumstances.

Budget 2025

According to the World Bank report, the Nigerian government’s revenue for 2025 is expected to be about 70% from oil and 30% from non-oil sources if full remittance of the fiscal savings from petrol subsidy removal is implemented, pointing out that retaining a portion of the subsidy savings outside the Federation Account undermines the fiscal benefits of the subsidy removal. Full transfer of these funds is essential to support a healthy fiscal position, reduce the fiscal deficit, and maintain macroeconomic stability.

“But as of January, NNPC was still only transferring about half of the resulting revenue gains from the subsidy elimination to the federation, and that’s because of arrears and counter-arrears and what have you.

“It’s just going to be important in the coming months to keep tracking this, and ultimately that all revenue gains from the difficult job of eliminating the subsidy do flow to the federation so that that can support a continued healthy fiscal picture, and in turn stand in on the government priorities for Nigeria,” the World Bank said.

The bank believes that a full remittance of the subsidy savings is going to be a determining factor in the successful implementation of the 2025 budget, which it described as very ambitious in the face of emerging realities. The World Bank expressed concerns that Nigeria’s 2025 budget is based on ambitious revenue assumptions, including daily oil production of 2.1 million barrels and an average crude price of $75 per barrel. It warned that failure to realise full remittance of subsidy savings could lead to revenue shortfalls, increased borrowing, or renewed deficit financing through means the government has pledged to avoid.

Improving Fiscal Situation

Analysts believe that what is more important at this point is for Nigerians to begin to enjoy the full dividend of savings from fuel subsidy removal. As the cost of living is rising, the best the government can do is to cut down frivolities and concentrate on policies that will put smiles on the faces of the people of Nigeria. This, they believe, will make whatever gains the current administration has registered visible to all Nigerians.

This was corroborated by the Acting World Bank Country Director for Nigeria, Taimur Samar, who said, “Nigeria has made impressive strides to restore macroeconomic stability. With the improvement in the fiscal situation, Nigeria now has a historic opportunity to improve the quantity and quality of development spending, investing more in human capital, social protection, and infrastructure.”

Meeting Nigeria’s Development Needs

He, however, explained that the allocation of public resources can begin to shift away from the past unsustainable pattern and rather towards meeting Nigeria’s large development needs, including the government playing its essential role of providing basic public services and serving as an enabler of the private sector–led growth.

“The allocation of public resources can begin to shift away from the past unsustainable pattern and rather towards meeting Nigeria’s large development needs, including the government playing its essential role of providing basic public services and serving as an enabler of the private sector–led growth.”

In light of the World Bank’s call for accountability, Nigeria must urgently reassess how savings from fuel subsidy removal are managed. These funds must be transparently deployed to revitalise critical sectors like healthcare, education, infrastructure, and security, ensuring that ordinary Nigerians, who bear the brunt of subsidy removal, can finally experience the improved standard of living they were promised.