The administrations of former President Muhammadu Buhari and President Bola Tinubu have collectively spent N9.31 trillion on petrol subsidies in 19 months. According to data from Agora Policy, Nigeria spent N5.10 trillion on petrol subsidies in 2023 and an additional N4.21 trillion in the first seven months of 2024.
Despite President Tinubu’s announcement to end petrol subsidies in his inaugural speech on May 29, 2023, the amount spent on subsidies has exceeded previous figures. Analysts attribute this increase to the devaluation of the naira following the liberalization of foreign exchange in 2023, which has caused the exchange rate to soar to N1,592.06 per dollar.
Agora Policy’s analysis shows that Nigeria’s subsidy percentage of GDP rose to 2.2% in 2023, despite the supposed elimination of the subsidy mid-year. This percentage was only higher in 2011, a year seen as a tipping point.
President Tinubu has approved the use of the 2023 final dividends owed to the federation to fund the petrol subsidy and suspended the 2024 interim dividend payments to the federation to bolster NNPC’s cash flow. According to an NNPCL forecast, the cumulative petrol subsidy bill from August 2023 will reach N6.884 trillion by December 2024.
NNPC’s Group CEO Mele Kyari noted that the initial savings from removing the fuel subsidy in May 2023 were short-lived due to the naira’s devaluation, which led to a month-on-month increase in the NAFEX exchange rate. The subsidy bill has fluctuated but reached a new high of N693.67 billion in January 2024. NNPC has warned that the mounting subsidy bill, attributed to “forex pressure,” may jeopardize its status as a “going concern” and its ability to sustain petrol imports.
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