RismadarVoice Reporters, August 21, 2026
The Federal Government of Nigeria has clarified that the removal of fuel subsidy did not create a large pool of cash at its disposal, but rather reduced a major fiscal burden and the amount of additional borrowing that would otherwise have been required.
The clarification was contained in the Federal Ministry of Finance’s publication, “Nigeria’s Economic Reforms — By the Numbers,” which explained the rationale behind some of the government’s major economic reforms, including petrol subsidy removal and the floating of the naira.
Responding to questions over the financial benefits of subsidy removal, the government said the reform should be understood primarily as a measure to ease pressure on public finances, rather than as a sudden revenue windfall,l adding that the benefits were not limited to the Federal Government, as states and local governments received substantially higher allocations from the Federation Account.
According to the ministry, the funds were used to support salaries, pensions, infrastructure and other public services, with states taking the largest effective share.
The government also addressed concerns surrounding the N7.13 trillion energy-security expenditure recorded by the Nigerian National Petroleum Company Limited (NNPCL) in 2024.
The expenditure was contained in the company’s audit report released in November 2025, although NNPCL did not specify its purpose. Some experts have linked the spending to subsidy-related payments or the protection of gas pipelines.
The ministry said that despite increased revenues following the reforms, the government continued to borrow because additional spending requirements exceeded the new resources available.
“Subsidy removal, therefore, cut the borrowing that would otherwise have been needed. All borrowing remains subject to National Assembly approval,” it stated.
The government disclosed that about N6.47 trillion in additional spending was directed towards strategic infrastructure, including the Lagos-Calabar Coastal Highway, Sokoto-Badagry Superhighway and Trans-Saharan Superhighway;y, the projects, ts according to the ministry,ry are designed to address infrastructure constraints and support investment and economic growth.
According to the government, the fiscal situation had become increasingly difficult by early 2023. A full year of petrol subsidy was projected to cost about N6.7 trillion, equivalent to roughly 70 per cent of federal revenue. The 2023 budget made provision for only six months of subsidy, indicating that its removal was already being planned.
The government argued that the subsidy disproportionately benefited wealthier households and cross-border smugglers rather than poor Nigerians.
It acknowledged that a phased removal would have been preferable but said the country no longer had sufficient fiscal space to sustain such an approach. To cushion the impact, the government introduced measures including a temporary wage award, state palliatives, cash transfers, NELFUND student loans and the compressed natural gas (CNG) transport programme.
It said subsidy savings now flow through the Federation Account, allowing states and local governments to benefit from the additional resources.
On the decision to float the naira, the government said the policy was necessary to end a multiple-exchange-rate system that had become vulnerable to arbitrage and patronage.
It said net foreign reserves had become critically low, while unmet foreign exchange obligations exceeded $7 billion, making continued defence of the official exchange rate unsustainable.
