By William Emmanuel Ukpoju
Nigeria, Africa’s largest oil producer, has long struggled with the paradox of wealth and want. Every year, billions of dollars in oil revenue flow into the federal treasury, yet ordinary Nigerians see little improvement in their daily lives. The latest economic assertion from Senator Olamilekan Adeola of Ogun West has reignited this debate: the government is allegedly saving over N10 trillion annually following the removal of the fuel subsidy under President Bola Tinubu’s administration.
At first glance, the claim seems a triumph: a bold policy decision, a decisive cut in public expenditure, and a narrative of fiscal prudence. But beneath the headline figure lies a more complex reality. Nigerians continue to grapple with high transport costs, escalating hospital bills, and an economy still heavily dependent on government borrowing. The critical question remains: if the government is saving trillions, why has it not translated into tangible gains for the populace?
The Fuel Subsidy:
A Fiscal Burden
For decades, Nigeria’s fuel subsidy has been a contentious issue. Designed to shield consumers from high petroleum prices, it has simultaneously drained public coffers. According to estimates before the recent policy reforms, the government borrowed between N6 trillion and N7 trillion annually just to maintain the subsidy. The rationale for removal, as stated by Senator Adeola, is clear: cutting subsidies frees up fiscal space, reduces borrowing pressure, and improves macroeconomic predictability.
“Subsidy removal is a necessary reform. It stops the bleeding and ensures resources are channelled to productive sectors,” the senator asserted, highlighting the administration’s commitment to fiscal discipline. On paper, it seems a straightforward solution: eliminate inefficiency, reduce government debt exposure, and create room for investment in infrastructure and social services.
Savings vs. Gains: The Disconnect
Despite the promise of N10 trillion in annual savings, the lived experience of most Nigerians tells a different story. Transportation costs have risen, as fuel prices directly affect commuting, goods delivery, and even the cost of food. The average household has felt the impact in wallets and weekly budgets, leaving many sceptical of the government’s “savings” narrative.
Critical question: If the government is indeed saving N10 trillion annually, why have these savings not translated into visible reductions in living costs, higher disposable incomes, or enhanced social services?
The answer lies partly in the nature of public finance. Fiscal savings from subsidy removal do not equate to immediate cash in citizens’ hands. Rather, they are accounting adjustments, funds that remain within the treasury to be allocated according to budgetary priorities. Without transparent and accountable allocation mechanisms, such savings can be invisible to the average Nigerian.
Debt Servicing: The Silent Erosion of Savings
One of the most glaring challenges undermining the perceived benefits of subsidy removal is Nigeria’s ballooning public debt. While the government may no longer borrow specifically to fund fuel subsidies, it continues to rely heavily on debt for general budgetary obligations. Current estimates put Nigeria’s debt stock at over $100 billion, with annual interest payments consuming a substantial portion of government revenue.
Independent analyses suggest that the entire fiscal benefit from subsidy removal has been largely absorbed by debt servicing. In effect, while the government claims a reduction in subsidy-related borrowing, the overall debt trajectory remains largely unchanged.
Critical question: Why hasn’t the N10 trillion in claimed savings been directed toward debt reduction or at least partially invested in sectors that directly benefit citizens, such as healthcare, education, or social protection programmes?
Borrowing Persists: Structural Fiscal Challenges
Nigeria’s continued reliance on borrowing exposes deeper structural weaknesses in the economy. Despite subsidy removal, the government still faces significant budget deficits, driven by:
“Volatile oil revenues: Oil prices fluctuate dramatically on the global market, leaving revenue streams unpredictable.
*Weak non-oil revenue generation: Tax collection, corporate levies, and value-added tax enforcement remain inefficient.
*Limited industrial and economic diversification: Overreliance on oil revenue leaves the government vulnerable to external shocks.
*High recurrent expenditure: A large portion of the budget is consumed by salaries, pensions, and debt service, leaving limited room for capital spending.
In short, subsidy removal was a necessary step, but it addresses only a single facet of Nigeria’s complex fiscal landscape. Without broader reforms, borrowing is unlikely to decrease significantly.
Critical question: If the removal of subsidies was meant to curb borrowing, why does the government still need to borrow heavily every year?
Citizen Voices: Scepticism and Concern
Across the country, Nigerians are keenly aware of the disparity between government claims and daily realities.
Market traders in Lagos report that transport and logistics costs have escalated since fuel subsidy removal, affecting commodity prices and shrinking profit margins.
Commuters in Abuja say that fuel price increases have hit budgets hard, with some families cutting back on essentials.
Civil society groups argue that the government has not adequately communicated how subsidy savings are being allocated, creating mistrust and scepticism.
These observations suggest that while the macroeconomic narrative may show “savings”, the microeconomic reality remains grim for many.
The Role of Transparency and Accountability
One of the fundamental issues undermining the perceived impact of subsidy savings is transparency. Citizens have limited visibility into how funds freed from subsidies are spent. Are they directed toward critical infrastructure? Do they fund social protection programmes for the most vulnerable? Or do they simply fill gaps in recurrent expenditure and debt obligations?
Without independent audits and publicly accessible reports, it is difficult to assess whether policy reforms are delivering tangible benefits. Transparent mechanisms, coupled with citizen engagement, are essential to convert macroeconomic gains into lived improvements.
Critical question: What safeguards exist to ensure that subsidy savings are equitably allocated, and how is their impact measured at the grassroots level?
Lessons from Other Economies
Looking beyond Nigeria, other countries have navigated subsidy reforms with varying degrees of success:
Indonesia: Gradually reduced fuel subsidies while simultaneously investing in targeted social programs, reducing inflationary pressures and protecting vulnerable citizens.
India: Introduced direct cash transfers to offset subsidy removal, linking fiscal savings to tangible benefits for households.
These examples demonstrate that subsidy removal alone is insufficient; complementary policies are crucial to translate fiscal prudence into social and economic gains.
Policy Implications for Nigeria
The current Nigerian approach highlights several lessons for policymakers:
nTargeted Social Protection: Subsidy savings should be used to fund cash transfers, healthcare, education, and other critical services for low-income households.
nDebt Management: Prioritise the use of fiscal savings to reduce interest burdens and enhance public investment capacity.
nRevenue Diversification: Strengthen non-oil revenue streams to reduce dependence on borrowing and oil volatility.
nTransparent Reporting: Publish clear, independent audits showing how subsidy savings are spent and their impact on citizens’ welfare.
nPublic Engagement: Engage citizens in understanding policy reforms, explaining trade-offs, and ensuring that reforms are perceived as beneficial.
From Accounting Gains to Citizen Impact
Nigeria’s removal of fuel subsidies has undeniably created fiscal breathing space, an estimated N10 trillion annually. However, the question that remains pressing is: who benefits from these savings?
While government statements focus on macroeconomic stability and reduced borrowing pressures, ordinary Nigerians continue to experience rising costs of living, limited access to improved services, and persistent economic uncertainty. Without stronger mechanisms to translate fiscal savings into tangible public benefits, subsidy removal risks remaining an accounting victory rather than a societal one.
As the country navigates its next phase of economic reform, policymakers face a defining challenge: ensuring that fiscal prudence translates into meaningful, equitable gains for citizens, not just balance sheets. Until this link is clearly established, every claim of “savings” will be met with scepticism, and borrowing will remain a stubborn reality, highlighting the gap between government accounting and public experience.
Critical question for Nigerians: Can the government convert N10 trillion in paper savings into real-world impact, or will citizens continue to pay the price for fiscal reforms they cannot feel?