$84bn saved from petrol subsidy now financing 40 key roads – Report

Ladi Patrick-Okwoli

The Federal Government has revealed that the elimination of the petrol subsidy under President Bola Tinubu has resulted in savings of over $84 billion, which are now being channelled into the construction and rehabilitation of 40 key road projects across the country over the past two years.

This was disclosed in a policy brief released by the National Orientation Agency (NOA), titled “Two Years Later: Key Benefits of Subsidy Removal,” and made available to journalists over the weekend in Abuja.

The report, which reviewed the outcomes of the subsidy removal since May 29, 2023, noted that the policy averted a looming economic crisis.

It also enabled the Tinubu administration to clear long-standing financial liabilities, increase capital investments, and support the financial stability of state governments.

The report noted that for decades—especially since the return to democratic rule—the oil subsidy regime posed a major challenge for the Federal Government.

Efforts by successive administrations to address the issue repeatedly failed, even as the economy continued to suffer significant losses. By 2015, public sentiment had shifted, with many Nigerians agreeing that the subsidy system had outlived its usefulness.

This became even more evident when the subsidy bill surged by 700 per cent in 2022, reaching an unprecedented N4 trillion.

From 2005 to 2022, successive governments spent a total of $84.39 billion on petrol subsidies.

These payments consumed more than 70 per cent of the Federal Government’s potential revenue, pushing the nation toward financial instability.

However, the report emphasised that with the decisive move to eliminate the subsidy, Nigeria is now saving billions and redirecting funds into tangible infrastructure development.

According to the National Orientation Agency, President Tinubu’s now-famous declaration,“subsidy is gone”made on his first day in office marked the beginning of difficult but necessary economic reforms.

These reforms, the agency said, have since delivered clear fiscal benefits across multiple sectors. One key impact of the subsidy removal has been the enhanced financial independence of state governments.

The agency explained that removing the subsidy not only shielded the economy from near collapse but also rescued several states from bankruptcy. When the current administration took office, Nigeria was using 97 per cent of its revenue just to service debt, and the national debt had already surpassed N100 trillion.

With subsidies previously consuming the bulk of federal income, both the federal and state governments had been forced to borrow heavily to cover their budgets.

The removal of the subsidy has since helped the country conserve substantial funds.

The report further highlighted that many states, which previously struggled to pay workers’ salaries, have now regained financial stability—even in the face of recent increases to the national minimum wage.

The agency reported that state governments are now experiencing significantly increased cash inflows, enabling them to pay salaries on time even after more than doubling the minimum wage—and to substantially reduce their debt levels.

According to the report, this financial improvement is directly tied to the increased revenue available as a result of fuel subsidy removal.

In 2023, Nigeria’s 36 states and 774 local government areas received a combined N6.16 trillion in allocations from the Federation Account Allocation Committee (FAAC), marking a 28.6 per cent rise from the N4.79 trillion shared in 2022.

By 2024, however, this figure surged to N15.26 trillion. Out of that, states and LGAs received N9.58 trillion N3.42 trillion more than the previous year thanks to the removal of fuel subsidies.

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The report also cited data from the Debt Management Office, showing that in just 18 months, the combined domestic debt of the 36 states and the Federal Capital Territory dropped from N5.82 trillion in June 2023 to N3.97 trillion by December 2024.

This indicates that state governments repaid N1.85 trillion in domestic debts over that period.

Additionally, the report highlighted that the savings from subsidy removal enabled the Federal Government to clear a $7 billion backlog in foreign exchange obligations owed to international airlines and businesses, debts that had previously placed Nigeria among the countries with the highest outstanding FX commitments globally.

Despite ongoing debt servicing and interventions in the foreign exchange market, Nigeria’s external reserves have also grown—from $35 billion in May 2023 to $38.9 billion as of March 2025.

According to the NOA, the government has utilized the savings to settle major liabilities, including the repayment of N7 trillion in Central Bank overdrafts (Ways and Means), and the early repayment of a $3.26 billion loan from the International Monetary Fund.

These efforts contributed to reducing the debt service-to-revenue ratio from 97 per cent in 2023 to 68 per cent in 2024.

Part of the recovered funds is being channeled into infrastructure on an unprecedented scale.

For the first time in decades, capital expenditure in the national budget exceeds recurrent spending.

The 2025 Appropriation Act allocates N23.96 trillion to capital projects, N10 trillion more than the N13.64 trillion earmarked for recurrent expenses.

To drive key infrastructure projects, the government has also launched the Renewed Hope Infrastructure Development Fund, seeded with N20 trillion.

The fund will support flagship initiatives such as the Lagos-Calabar Coastal Highway, the East-West Road, the Mambilla Hydropower Project, the Enugu-Abakaliki-Ogoja Highway, the Sokoto-Badagry Super Highway, and the Eastern Rail Corridor.

The report emphasised this shift, noting that previous administrations typically devoted 70 per cent of their annual budgets to recurrent costs, leaving just 30 per cent for capital development.

In contrast, the Tinubu administration has reversed that trend, with capital spending now taking the lead.

The impact of these investments is already visible, the agency noted, with 40 road projects being commissioned across the country in celebration of President Tinubu’s second year in office.

Beyond infrastructure, the subsidy savings are being used to support key sectors including education, housing, healthcare, digital innovation, and the solid minerals industry.

The government has established the Nigerian Education Loan Fund, which has been allocated over N203 billion to provide interest-free loans to students in tertiary institutions.

It has also expanded the use of compressed natural gas (CNG) as a cleaner and more affordable alternative to petrol, aimed at reducing transport costs.

While the government continues to emphasise the long-term benefits of ending fuel subsidies, critics argue that the policy has worsened inflation and increased hardship for many Nigerians.

Nevertheless, the NOA defended the reforms, describing them as essential for economic recovery and long-term development.

It likened the short-term hardship to the pain of childbirth, saying that while the process may be difficult, Nigerians are already beginning to experience the benefits.

Business Day NG