Nigeria’s Petrol Subsidy Expenditure Reaches N9.31 Trillion in 19 Months, Exceeding Previous Spending
In just 19 months, the combined administrations of former President Muhammadu Buhari and President Bola Tinubu have expended a staggering N9.31 trillion on petrol subsidies. This figure surpasses the total N8.15 trillion spent over the previous 16 years.
Data from Agora Policy, including information from FAAC reports, NEITI, and NNPCL’s 2023 AFS, reveals that Nigeria spent N5.10 trillion on petrol subsidies in 2023 alone. An additional N4.21 trillion was allocated in the first seven months of 2024.
From 2006 to 2021, Nigeria’s total petrol subsidy expenditure amounted to N8.15 trillion, with the total reaching N20.37 trillion over 18 years and seven months. Notably, in 2022, the government spent N2.911 trillion on subsidies.
President Bola Tinubu had declared the end of the petrol subsidy in his inaugural speech on May 29, 2023. However, subsidy spending has continued to rise, attributed to the naira’s devaluation following the liberalisation of foreign exchange rates in 2023. Since the naira’s liberalisation, its value has dropped over 60%, with the exchange rate climbing to N1,592.06 per dollar this week, up from N740 on June 1, 2023.
Agora Policy’s analysis shows that the percentage of GDP spent on subsidies peaked at 2.2% in 2023, the highest since 2011. Historical data indicates fluctuating subsidy percentages from 0.7% in 2006 to 2.2% in 2023, with significant spikes in 2011 and 2022.
Recently, President Tinubu approved the use of 2023 final dividends owed to the federation to finance the petrol subsidy and The situation has created significant challenges for NNPC, which has reported concerns about its financial stability. The soaring subsidy payments have strained the corporation’s cash flow, raising doubts about its ability to maintain petrol imports. The increasing bill is largely attributed to persistent forex pressure, exacerbated by the naira’s depreciation.
Despite efforts to manage the subsidy burden, NNPC’s financial difficulties have persisted. The corporation has struggled with fluctuating subsidy costs, including a decrease to N537.66 billion in December 2023 before climbing to a new peak of N693.67 billion in January 2024. These fluctuations highlight the volatility and ongoing strain on Nigeria’s economic resources.
The need for a sustainable solution remains critical. Analysts and stakeholders are calling for urgent reforms to address the underlying issues contributing to the escalating subsidy costs and to explore more effective approaches to fuel pricing and subsidy management.
In summary, Nigeria’s petrol subsidy expenditure has reached unprecedented levels, reflecting both the complexities of managing such a large-scale program and the broader economic challenges facing the country. The government’s continued focus on addressing these issues will be crucial in stabilizing the economy and ensuring long-term sustainability.
