The Federal Government’s first quarter 2025 savings following the removal of petrol subsidies increased by more than 500% compared to previous periods, according to data released by the National Orientation Agency (NOA).
The Agency, in its newly released report titled “Two Years Later: Key Benefits of Subsidy Removal”, noted that the subsidy removal has led to a significant increase in government revenue as the Nigerian National Petroleum Company Limited (NNPCL) began transferring savings to the Federation Account Allocation Committee (FAAC).
The 45th edition of NOA’s ‘The Explainer’ focuses on President Tinubu’s 2023 subsidy removal, which ended decades of economic strain.
The savings from the declaration that stopped the subsidy freed vast resources, boosting government revenue from ₦154 billion to ₦836 billion in Q1.
As a result, states saw FAAC allocations jump to ₦15.26 trillion in 2024, allowing salary payments and ₦1.85 trillion debt reduction.
Foreign reserves also grew to $38.9B despite forex obligations.
The savings also funded major investments such as a N20 trillion infrastructure fund, NELFUND student loans of ₦54 billion, agriculture, ₦1.5 trillion, solid minerals, ₦ 1 trillion, and CNG transport conversion to lower costs, the report explained, adding that capital expenditure now exceeds recurrent spending.
The removal of the petrol subsidy by President Bola Tinubu ended a historic financial drain that cost Nigeria over $84 billion.
The report added that the savings have helped finance 40 critical road projects across the country in the two years of President Tinubu’s administration.
“For decades, particularly since the advent of the current democratic dispensation, a major albatross of the Federal Government had been the oil subsidy regime. Successive administrations’ zeal to tame the menace had proved a fiasco while the economy continued to haemorrhage profusely. However, by 2015, many Nigerians had reached a consensus that it was high time the subsidy was consigned to the dustbin of history, as the subsidy budget in 2022 rose by 700 per cent to N4tn, the highest ever in subsidy history.
According to the report, the subsidy removal saved Nigeria from bankruptcy.
“Between 2005 and 2022, successive governments spent $84.39bn on fuel subsidies. These subsidies consumed over 70 per cent of potential federal revenue, pushing the country to the brink of bankruptcy. But with the bold decision to remove it, Nigeria is now saving billions and investing in real infrastructure,” the agency stated.
According to the NOA, Tinubu’s widely debated “subsidy is gone” declaration on his first day in office ushered in tough reforms that have since yielded tangible fiscal gains across various sectors. One of the major outcomes of subsidy removal, the NOA noted, was the improved financial autonomy of state governments.
It said, “Removal of subsidy not only saved the entire economy from imminent collapse, it also rescued several states of the federation from bankruptcy. Upon the take-off of this incumbent administration, Nigeria was spending 97 per cent of its revenues to service debts until its debt profile exceeded N100tn.
“Fuel subsidies consumed more than 70 per cent of the potential Federal Government’s revenue, forcing both the central and state governments to resort to heavy borrowings to finance their budgetary expenditures, but the removal helped the country to save billions.”
However, the NOA insisted the reforms were necessary to reset the economy and redirect resources toward long-term growth. It likened the pains of subsidy removal to “a woman in labour,” whose suffering eventually gives way to new life, adding that “Nigerians are already reaping the gains.”
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It also stated that most states, previously struggling to pay salaries, have become financially stable despite recent increases in the minimum wage.
“States now swim in inflows of funds, paying salaries as at when due despite more than 100 per cent minimum wage increase and drastically reducing their debt portfolios because subsidy removal puts more money into their hands.
“In 2023, the 36 states of the federation and 774 local government areas got a total of N6.16tn as FAAC allocations, implying a 28.6 per cent increase from the N4.792tn they received in 2022, but in 2024, revenues rose astronomically to N15.26tn as a result of subsidy withdrawal, giving the states and 774 LGAs N9.58tn, which was N3.42tn higher than what they received in 2023.
“Thus, as records from the Debt Management Office have shown, in the last 18 months, the total domestic debt profile of the 36 states and FCT had declined from N5.82tn in June 2023 to N3.97tn in December 2024. This implies that subnational administrations had repaid N1.85tn debts within one and a half years.”
The government also disclosed that it is investing part of the savings in large-scale infrastructure. For the first time in decades, capital expenditure in the 2025 Appropriation Act surpassed recurrent spending.
