Removing the petrol subsidy in May 2023 was the right decision. The subsidy was eating money Nigeria did not have, and ending it has put trillions of naira into the hands of state governments. But the government could have done far more to cushion the pain that followed.
The subsidy in one story
Picture a village that owns a large rice farm, which everyone in the community works on together. The village can grow rice, but it has no mill to turn the raw paddy into rice you can cook. So the village head sells the raw paddy to the next village, which has a mill, and uses the money to buy back milled rice at ₦450 a mudu. He then sells it to the villagers at just ₦150 a mudu, and the village purse pays the ₦300 difference on every mudu. That gap is the subsidy. Whatever is left from the paddy sales goes into the village purse.
For a while this works. But the price of milled rice keeps climbing, and soon the money from selling paddy is no longer enough to buy it. The village head starts borrowing on top of the paddy money just to keep the cheap rice coming.
The village also has an agency meant to buy tractors, fertiliser and better seed so the farm can grow. But after years of money going round this loop, with nothing left over and much wasted along the way, the agency cannot invest, so the harvest stays the same. Meanwhile the village keeps growing, and more and more people eat the cheap rice without adding anything to the farm.
That is roughly where Nigeria was by 2022. The raw paddy is crude oil, the mill next door is foreign refineries, the cheap rice is subsidised petrol, and the farm agency is NNPC. The rice prices are close to the real ones too: in 2022, a litre of petrol cost about ₦450 to bring in but sold for less than ₦200.
How much oil money is there, really?
Even before anyone takes a cut, all the crude oil Nigeria pumps in a year is worth roughly ₦770 per Nigerian per day: less than the price of one litre of petrol. The sum, in round numbers:
- Crude oil pumped per day: about 1.5 million barrels (Nairametrics).
- Average price per barrel: about $80.
- Value per day: 1.5 million × $80 = $120 million.
- Value per year: about $44 billion, or about ₦61 trillion at ₦1,400 to the dollar.
- Per Nigerian per year (220 million+ people): about $200, or ₦280,000.
- Per Nigerian per day: about ₦770.
The average pump price of petrol has been above ₦1,000 a litre all through 2026. So the whole country's oil, shared out equally, would not buy each citizen one litre a day.
Back to the rice farm: the village's whole harvest, sold at market price and shared out equally, gives each villager less than the price of one mudu of milled rice a day. A village that poor cannot keep paying ₦300 on every mudu it hands out.
Why the barrels we pump are not the money we get
Of all the oil Nigeria pumps, only about one barrel in five actually belongs to the government. Between 2021 and 2023, the Federation's own share averaged roughly 200,000 to 300,000 barrels a day, while total output was well over a million (Agora Policy).
The rest goes to foreign partners under joint-venture and production-sharing deals, which let oil companies recover their costs and take their profit share first, or is lost to theft, which NEITI put at over 140,000 barrels a day between 2009 and 2020 (Nairametrics). And by 2023, almost all of the government's own share was being set aside for local refining, the same crude that fed the subsidy.
In rice-farm terms: the village owns the land, but the partners who brought the tractors take most of each harvest, thieves carry off sacks at night, and the few sacks left were the ones being sold to pay for cheap rice.
Subsidy vs schools, hospitals and security
In 2022 alone, Nigeria spent ₦4.39 trillion holding down the petrol price (THISDAY). Compare that with what the 2022 budget gave the sectors that matter most (Sahelian Times):
- Petrol subsidy (actually spent): ₦4.39 trillion
- Defence and security: ₦2.41 trillion (subsidy was 1.8 times this)
- Education: ₦1.29 trillion (subsidy was 3.4 times this)
- Health: ₦0.82 trillion (subsidy was 5.4 times this)
That is about as much as education, health and security put together. The government itself said in 2022 that subsidy over the previous five years had cost as much as the whole budget for health, education, agriculture and defence in that period (Leadership).
Put it in household terms. Picture a family that spends ₦44,000 a month keeping fuel in the generator, while it spends ₦24,000 on the security guard, ₦13,000 on school fees and just ₦8,000 on hospital bills. That family spends twice as much keeping the generator running as on school fees and hospital bills combined. That was Nigeria's budget in 2022.
The money states now get
The biggest winners of subsidy removal are the states. The 36 states together received ₦3.35 trillion from the Federation Account in 2022, and ₦8.19 trillion in 2025 (Trust Radio).
Remember 2015, when 27 of the 36 states could not pay workers' salaries and needed federal bailouts, with some owing six to eight months (Daily Trust). In 2026, the chairman of the Governors' Forum said governors are no longer borrowing from the federal government to pay salaries (Leadership), and that most states now pay a ₦100,000 minimum wage, above the ₦70,000 national minimum (TheCable).
Here lies the irony. Governors such as Gombe's Inuwa Yahaya openly credit subsidy removal for the projects they can now fund (NAN). Yet many who praise their governor's new roads still blame the President for the very policy that paid for them. Citizens should also ask their governors what the extra money has bought.
In the rice village: once the village head stopped paying ₦300 on every mudu, the purse filled up again, and ward heads who once could not pay their workers now pay them on time.
Why 2026 would have been far worse with the subsidy
If the subsidy were still in place, 2026 could have broken the federal purse. The US–Israel war with Iran began at the end of February 2026, and Iran shut the Strait of Hormuz, the route for about a fifth of the world's oil (Marine Link). Brent crude, around $72 before the war, climbed above $120 by late April (Gazette).
Under the old system, the government paid the whole gap between the world price and a fixed pump price. In 2022 that gap was about ₦283 a litre, and the bill reached ₦4.39 trillion. With petrol now costing over ₦1,000 a litre to supply, holding the old ₦185 price would mean a gap of roughly ₦850 to ₦1,400 on every litre: three to five times the 2022 gap. That is a rough estimate, but the direction is clear: the bill would have swallowed a huge share of the budget, and the states' windfall above would never have existed.
In rice terms: a war in a faraway land doubles the price of milled rice. A village still promising ₦150 rice would have had to borrow against its land to keep the promise.
Why our own refinery doesn't mean cheap petrol
Crude oil is an international product. It is priced in dollars on a world market, and whoever owns a barrel can sell it to the highest bidder anywhere. So a refinery in Lagos must pay about the same world price for crude as a refinery in India or Europe. Local refineries, including Dangote, buy crude at international prices tied to Brent, with no discount (Legit.ng). Dangote can also source only about five crude cargoes a month locally, out of the 13 to 15 it needs, and imports the rest (Leadership).
That is why pump prices jumped by nearly 20% in March 2026 when the war pushed crude up, even with a working refinery at home (Vanguard). What the refinery does change: we save on shipping and import costs, spend fewer scarce dollars, and get steadier supply. Dangote supplied 62% of Nigeria's petrol in January 2026, the first time local production beat imports.
In rice terms: even when the village builds its own mill, the farmers who own the paddy can still sell it to the next village at market price. So the village mill must pay market price too, and milled rice can only be as cheap as raw paddy allows.
Where the government fell short
Supporting the removal does not mean the government has done its part. It still spends far more than it earns, and it handled the fallout poorly.
- Budgets beyond our means. The 2026 budget proposed ₦58.18 trillion in spending against ₦34.33 trillion in expected revenue (21st Century Chronicle); the National Assembly then raised it to about ₦68.3 trillion and approved a fresh $6 billion loan (Leadership).
- An expensive government. The Presidency and National Assembly together get over ₦700 billion in 2026, more than a quarter of the whole ₦2.48 trillion health budget.
- No cushion was ready. Removal was announced in one sentence, with no relief plan. A cash transfer meant for 15 million people had reached only 1.7 million by December 2023 (Human Rights Watch).
- Prices ran away. Inflation hit 34.8% by December 2024 (BusinessDay), eating up the new ₦70,000 minimum wage.
A government asking citizens to pay the real price of petrol should first cut its own costs, and should have had a payment system for the poor ready before pulling the plug, not after.
The bottom line
The subsidy was a promise Nigeria could no longer afford. Ending it freed trillions for the states, spared the country a far bigger bill when war sent oil prices soaring in 2026, and made petrol reflect its real price. The pain that followed was real, and much of it could have been softened with better planning. But the answer to poor handling is better handling, not bringing the subsidy back.
Critics reply that the poorest Nigerians paid for the reform first, while the savings have been slow to reach their lives. That concern deserves an answer from every level of government.