The administrations of former President Muhammadu Buhari during the last five months of his tenure in 2023 and President Bola Tinubu have jointly spent N9.31 trillion on petrol subsidies over a period of 19 months.
Data from Agora Policy, supported by reports from FAAC, NEITI, and NNPCL’s 2023 AFS, reveal that Nigeria allocated N5.10 trillion for petrol subsidies in 2023, with an additional N4.21 trillion set aside in the first seven months of 2024.
Further analysis indicates that Nigeria’s total petrol subsidy expenditure reached N8.15 trillion between 2006 and 2021, totaling N20.37 trillion over 18 years and seven months. In 2022 alone, the government spent N2.911 trillion on petrol subsidies.
In his inaugural speech on May 29, 2023, President Bola Tinubu declared the end of the petrol subsidy. However, expenditures on subsidies have continued to rise since then, attributed to the devaluation of the naira following the liberalization of foreign exchange in 2023.
Since the naira’s liberalization, its value has decreased by over 60%, with the exchange rate surging to N1,592.06 per dollar this week, up from N740 on June 1, 2023.
Analysis reveals that Nigeria’s subsidy as a percentage of GDP increased to 2.2% in 2023, despite the announced elimination of the subsidy in mid-year. This percentage was only higher in 2011, a year viewed as a turning point.
Agora Policy’s examination 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 indicated that President Bola Tinubu has approved the NNPCL’s request to utilize the 2023 final dividends owed to the federation for the petrol subsidy. The report also mentioned that the president authorized the suspension of the 2024 interim dividend payments to the federation to enhance NNPC’s cash flow.
According to an NNPCL forecast, the cumulative petrol subsidy bill starting from August 2023 is projected to reach N6.884 trillion by December 2024. Analysts noted that President Tinubu’s announcement to abolish the fuel subsidy in May 2023 initially saved the government N400 billion by June. However, NNPC’s Group CEO Mele Kyari stated that these savings were short-lived due to the naira’s devaluation, which resulted in a month-on-month increase in the NAFEX exchange rate.
In August 2023, NNPC’s fuel importation costs shifted from surplus to negative, resulting in a subsidy bill of N52.73 billion. After fluctuating for several months, the bill escalated to N833.68 billion in April. In June 2024, NNPC raised concerns with President Tinubu, indicating that subsidy payments were significantly impacting its cash flow and jeopardizing its status as a “going concern.”
NNPC also cautioned that it might not be able to sustain petrol imports due to the increasing subsidy bill, which it blamed on “forex pressure.” Even though the bill slightly decreased to N537.66 billion in December, it reached a new high of N693.67 billion in January 2024.
