The administrations of former President Muhammadu Buhari in the final five months of his term in 2023 and President Bola Tinubu have collectively spent N9.31 trillion on petrol subsidies in 19 months.
Data from Agora Policy, supported by sources such as FAAC communiqués, NEITI reports, and NNPCL’s 2023 AFS, have revealed that Nigeria spent N5.10 trillion on petrol subsidies in 2023, with an additional N4.21 trillion allocated in the first seven months of 2024.
Further analysis from Agora Policy indicates that Nigeria’s total petrol subsidy expenditure reached N8.15 trillion between 2006 and 2021 and N20.37 trillion over 18 years and seven months. In 2022 alone, the government paid N2.911 trillion to subsidise petrol.
In his inaugural speech on May 29, 2023, President Bola Tinubu announced the end of the petrol subsidy. However, the amount spent on subsidies since then has exceeded previous figures. Analysts attributed this increase to the devaluation of the naira following the liberalisation of foreign exchange in 2023.
Since the naira‘s liberalisation, its value has plummeted by over 60%, with the exchange rate soaring to N1,592.06 per dollar this week, compared to N740 on June 1, 2023.
The analysis has shown 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.
Agora Policy’s analysis of Nigeria’s subsidy as a percentage of GDP from 2006 to 2023 shows the following: 0.7% (2006), 0.7% (2007), 0.9% (2008), 0.5% (2009), 0.7% (2010), 3% (2011), 1% (2012), 0.6% (2013), 0.5% (2014), 0.3% (2015), 0.1% (2016), 0.1% (2017), 0.6% (2018), 0.4% (2019), 0.1% (2020), 0.7% (2021), 1.5% (2022), and 2.2% (2023).
A recent report revealed that President Bola Tinubu has approved the NNPCL’s request to use the 2023 final dividends owed to the federation to fund the petrol subsidy. The report also indicated that the president approved suspending 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. According to analysts, President Tinubu’s announcement of removing the fuel subsidy in May 2023 initially saved the government N400 billion by June. However, NNPC‘s Group CEO Mele Kyari noted that the savings were short-lived due to the naira’s devaluation, which led to a month-on-month increase in the NAFEX exchange rate.
In August 2023, NNPC’s fuel importation costs shifted from surplus to negative, incurring a subsidy bill of N52.73 billion. After fluctuating for months, the bill surged to N833.68 billion in April. In June 2024, NNPC raised concerns with President Tinubu, stating that the subsidy payments severely impacted its cash flow, jeopardising its status as a “going concern.”
NNPC also warned that it might be unable to sustain petrol imports due to the mounting subsidy bill, which it attributed to “forex pressure.” Although the bill dropped slightly to N537.66 billion in December, it reached a new high of N693.67 billion in January 2024.
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