The final removal of Nigeria’s longstanding fuel subsidy marked the beginning of a new economic reality, significantly altering the country’s oil sector and leading to a sharp rise in fuel prices and inflation, with petrol prices more than doubling and inflation reaching 32.7 per cent. LAOLU AFOLABI writes on the widespread hardship and Nigerian’s expectations
Removing the long-standing fuel subsidy by the Federal Government has triggered profound changes in Nigeria’s oil sector, marking the start of a new economic reality. The subsidy, which for years kept petrol prices artificially low at great cost to the nation’s economy, was finally eliminated in 2023 under President Bola Tinubu. In his inaugural speech, the President declared, “Subsidy is gone.” This announcement was swiftly followed by a surge in petrol prices nationwide. By the evening of May 29, 2023, prices had risen to N500, up from around N198, or slightly more in some areas.
As the government moves away from subsidising fuel and allowing market forces to dictate prices, the implications are both broad and deep. The policy and the floating of the naira sharply led to a rise in the cost of commodities in Nigeria, pushing essential items beyond the reach of millions of people across Africa’s most populous nation. By September, the high petrol price had pushed inflation to 32.7 per cent. Even despite the high cost of the product, availability has been an issue, with queues snaking into major roads and streets, thereby becoming a regular feature across filling stations in Nigeria.
Justifying his “off-the-record” remarks, the President explained that by the time he assumed office, there was no provision for the subsidy, as the previous administration of President Muhammadu Buhari had not allocated funds for subsidy payments in the 2023 budget. As petrol prices soared, the government introduced an intervention which was becoming bogus due to the high exchange rate. Reports of indebtedness by the Nigerian National Petroleum Company Limited later surfaced. Unfortunately, the company, which had previously declared significant profits, could no longer meet its obligations.
The immediate effects of full deregulation have been far-reaching, but so too are the long-term implications. The pump price of petrol has further increased by over 100 per cent, as petrol now sells for between N998 and N1,100 and even N1,200 at some fuel stations. At the moment, Nigerians are grappling with the shift while awaiting the expected benefits of deregulation, with the foreign exchange starring them in the face.
With the new pump price adjustment across the country, the Nigeria Labour Congress called for a reversal of the pump price hike, arguing that the new cost of the commodity will further “deepen poverty as production capacities dip.”
It said, “In light of this, we urge the government to immediately reverse this rate hike as previous increases did not produce any good results. People only got poorer.”
Many Nigerians believed that local refining, particularly from the much-celebrated Dangote Refinery, would bring an immediate reduction in fuel prices. Regrettably, the price at the pump remains stubbornly high. The conception that local refining, particularly by the Dangote Refinery and the NNPC refineries would instantly result in cheaper fuel prices is a misconception. The benefits of deregulation extend far beyond lower prices at the pump. This transformation will drive competition, boost investments, and propel the country toward energy security and economic stability.
The $20bn refinery began operations in January, rolling out naphtha and jet fuel. After over a year of its launch in May 2023, Dangote Refinery, on Tuesday, September 3, 2024, rolled out its first Premium Motor Spirit, also known as petrol. By September 15, the NNPC began loading at the Dangote Refinery gantry, after some hitches were sorted. The Federal Government committee also activated the October 1 commencement date for the sale of crude oil to Dangote Refinery in naira.
The NNPC refineries in Warri, Port Harcourt and Kaduna also beamed hope for Nigerians. It was reported that the NNPC spent N16.7tn (approximately N17tn) on the turnaround maintenance of the three refineries between 2002 and 2022. At a sitting of the ad hoc committee to investigate alleged economic sabotage in the Nigerian petroleum industry in August 2024, the Senate raised concerns over the $1.5bn approved in 2021 by the Federal Executive Council for the turn-around maintenance of the Port Harcourt Refinery. By September 2024, the refinery had failed to begin fuel production for a record seventh time.
The Dangote Refinery, which recently commenced operations, is, however, poised to be a major force in reshaping Nigeria’s oil industry. It offers independent marketers the ability to source fuel directly, not only from its facilities but also from other local and international suppliers. This marks a significant departure from the past, where the Nigerian NNPCL held a near-monopoly over fuel procurement and distribution.
With the deregulation of the oil sector, NNPCL now operates as a commercial entity, competing alongside other players in the market. This competitive landscape is expected to promote greater transparency and efficiency, as marketers can now purchase fuel from the most cost-effective sources. While competition should, in theory, drive down fuel prices over time, current petrol prices remain tied to global market conditions, and even domestic producers like Dangote Refinery must sell at prices that reflect international benchmarks.
Despite local production, the cost of petrol in Nigeria is still tied to global market forces. This means that the prices consumers pay are influenced by the global price of crude oil, refining costs, and exchange rates. The reality is that the Nigerian oil industry operates in a global market where these factors heavily dictate pricing.
However, as more refineries come online and local production capacity increases, the reliance on imported fuel is expected to diminish, contributing to long-term price stability. The Nigerian government’s fully deregulated approach under the Petroleum Industry Act fosters this competitive environment, mandating that all participants — whether NNPCL or private marketers — abide by market rules and operate transparently.
This evolving structure is also anticipated to drive significant economic benefits. As local refining expands, Nigeria should see a decrease in fuel imports, helping to stabilise prices while stimulating job creation across the refining, logistics, and retail sectors. Additionally, as global oil prices fluctuate, these changes will increasingly have a direct impact on fuel costs in Nigeria, but a robust domestic refining sector could mitigate some of the volatility.
“Well, we know now that we cannot call it an increase but rather we can call the removal of subsidy deregulation. Now, deregulation has started taking place fully,” Independent Petroleum Marketers Association of Nigeria President, Abubakar Garima, said when he was featured as a guest on Channels Television’s breakfast show Sunrise Daily.
He said with the sector now fully deregulated, availability will be a thing of the past. “The change that Nigerians are going to expect now: one, we are expecting availability since there is no subsidy,” Garima said.
“The NNPC is not the sole importer. Other marketers too will participate. It is the same thing in buying the product. Other marketers will buy products directly from Dangote [Refinery]. It is not only NNPC.”
On his part, the National Secretary of the IPMAN, James Tor, said petrol prices may drop after the Federal Government allowed marketers to buy directly from Dangote Refinery and import from other sources.
Tor, in an interview while speaking on the recent deregulation effort by the Federal Government to allow marketers to directly negotiate petrol prices from Dangote Refinery. He said this move would end the NNPC monopoly as the sole purchaser of petrol products in the country.
The end of subsidies also means that Nigerians now pay the true market value of fuel, including the costs associated with refining, logistics, and distribution. For decades, the government subsidised these costs but has now announced that it is unsustainable. Removing subsidies allows the sector to function independently, with prices reflecting the true cost of production. This ensures long-term sustainability after years of inefficiencies and corruption that plagued the subsidy system. To many Nigerians, it was a painful adjustment.
For years, the government spent billions of dollars annually subsidising fuel prices, draining resources that could have been invested in infrastructure, healthcare, and education. With the subsidy regime, fuel smuggling across borders became rampaging, as subsidised fuel was smuggled to neighbouring countries where prices were higher, thus creating a lucrative black market.
The Group Chief Executive Officer of the NNPCL, Mele Kyari, in an interview with Channels TV, said subsidy created a price disparity between Nigeria and neighbouring countries, making smuggling highly profitable. He said before subsidy removal, the price difference was substantial, incentivising smugglers to transport fuel across borders.
“The removal of the subsidy has effectively calibrated fuel prices, eliminating the profitability of smuggling. Fuel subsidies removal has been a game-changer in the fight against cross-border smuggling. For decades, the subsidy created a lucrative opportunity for smugglers to profit from the price difference between Nigeria and neighbouring countries. This is a positive development for Nigeria’s energy sector, as it can help to ensure that consumers are paying fair prices for fuel,” he said.
Realities, expectations
How the full deregulation of the oil sector was carried out demonstrated that the government would be resolute. The way it quelled uprisings against the fuel hike and the attendant harsh economy is worth studying. The President, in some of his campaign outings, stated that no matter how long the protests held, he would remove subsidies and he had done so. Nigerians should, however, brace up and face realities.
In the wake of rising petrol prices, the government has been promoting alternatives like Compressed Natural Gas through the Presidential CNG Initiative. CNG is a cleaner and more affordable alternative to petrol, and it is priced significantly lower, offering immediate relief to consumers.
The government has initiated a “convert-now-pay-later” scheme to help vehicle owners switch to CNG, and more CNG stations are being set up across the country.
CNG adoption is expected to reduce transportation costs and decrease Nigeria’s dependence on petrol. The shift to cleaner energy sources also aligns with global trends toward reducing carbon emissions and promoting environmental sustainability. This diversification will provide Nigerians with more energy options and help mitigate the impact of volatile global oil prices.
Nigerians should hope for more investments in critical infrastructure as the government pledged to use the savings from subsidy removal for developmental projects. Now, the citizens must hold the government accountable for how these funds are spent, ensuring that they are used to improve essential services and the quality of life for all citizens.
The real economic gains will be how local refining contributes to industrialisation, job creation, and infrastructure development. Dangote Refinery and other local refiners will help drive investment in downstream infrastructure which has stagnated for over four decades. Thousands of jobs will be created across the value chain, from refining to distribution, and the overall economic environment will improve.
Also, local refining will significantly reduce Nigeria’s dependence on imported petroleum products. This has the potential to stabilise the country’s forex market and strengthen the Naira. By producing and refining oil domestically, Nigeria can retain more of its economic value within the country, reducing the demand for foreign currency and ultimately helping to curb inflation. In the future, Nigeria’s ambition to become a net exporter of petroleum products will not only earn forex but will also bolster its standing in global markets.
With refineries like Dangote’s operating at full capacity, Nigeria will no longer be vulnerable to global fuel shortages or disruptions in import logistics. This stability will catalyse industrialisation, as businesses can rely on a consistent energy supply to power production and growth.
The expansion of downstream infrastructure—pipelines, storage facilities, and depots—will also create a more resilient supply chain. Akwa Ibom State, for example, is already preparing to establish a petroleum depot in partnership with federal agencies to ensure steady fuel supplies at reasonable prices. Such initiatives are key to moderating fuel costs and ensuring that regions across Nigeria benefit from deregulation.
Nigerians are not known for the patience being demanded by the President for the policy to mature. Records of Nigeria’s past leaders make it hard to believe any policy is meant for the good of the country. Experts, however, thought that the short-term effects of full deregulation may be challenging, but the long-term benefits will enable shared prosperity and economic stability. The road to economic recovery will require Nigerians to adapt to the new realities of a deregulated oil sector.
Ben Murray-Bruce, a prominent business leader in a video posted on X.com, emphasised that the government can no longer control fuel prices. Instead, Nigerians must focus on reducing energy consumption, exploring alternative energy sources such as solar, and embracing electric vehicles. Carpooling, switching to solar panels, and investing in mass transportation can also help reduce the high cost of living.
Former Minister of Police Affairs, Humphrey Abba, in an interview with Channels, said, “What we have today is ‘hardship pro max.’ We have imported policies that are irrelevant to our needs… Who can survive inflation at 32.7%?”
The Independent Media and Policy Initiative, however, believed otherwise. Speaking on the economy, the policy think tank said the data available show that the Nigerian economy is responding progressively, with the recent full deregulation and harmonisation of the foreign exchange.
In a policy statement signed by its Chairman, Dr Niyi Akinsiju, IMPI argued that there is a changing paradigm in the economic landscape due to ongoing reforms. “Indeed, our desk research on the economy indicates that the Federal Government is making solid strides in different segments of the nation’s economic spheres. More impressive, to our minds, is the renaissance of the Federal Government’s saving capacity, targeted at infrastructural development across the 36 states and the Federal Capital Territory.”
