Three years after President Bola Tinubu announced the removal of petrol subsidy with the declaration that “the subsidy is gone,” fuel queues that once dominated filling stations across Nigeria have largely disappeared, but the policy continues to generate debate over rising living costs and how state governments are using the resulting revenue windfall.
Before the subsidy removal in May 2023, Nigeria regularly experienced long petrol queues despite being Africa’s biggest oil producer. The policy shift freed up what the Federal Government estimated at about ₦4 trillion in annual savings, funds previously spent sustaining a subsidy regime critics described as wasteful, opaque and beneficial mainly to oil importers, traders and politically connected middlemen.
The reform has also improved investor sentiment. S&P Global Ratings recently upgraded Nigeria’s sovereign credit outlook, citing ongoing economic reforms, improving policy credibility and signs of greater stability in the foreign exchange market.
However, while the removal of subsidy ended scarcity and boosted public revenue, many Nigerians are still questioning whether the gains have translated into better living conditions.
Federation Account Allocation Committee disbursements to the three tiers of government rose sharply to ₦28.78 trillion in 2024, representing a 79 percent increase from the ₦16.28 trillion shared in 2023 and more than double the ₦12.36 trillion shared in 2022. State governments alone received ₦5.186 trillion in 2024, rising further to ₦7.315 trillion in 2025. With 13 percent derivation revenue included, total inflows to states reached ₦8.934 trillion in 2025.
Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co., said the increase in FAAC allocation had not been matched by visible development across states.
“With the removal of subsidy and liberalisation of the naira, we have seen a significant surge in FAAC allocation,” he said. “But if you look at the level of development in the states, it has not improved when compared to the surge in their revenue.”
A state finance commissioner also described the policy as a major fiscal reform, saying money that previously went to fuel importers now goes to governments.
“This is the single most important fiscal reform in 30 years,” the commissioner said. “Before, the money went to fuel importers. Now it comes to us.”
Despite the increased revenue, independent expenditure monitoring groups have reported a disconnect between what states receive and what citizens see on the ground. Roads remain poor in many places, hospitals are still under-equipped, and rural schools continue to struggle with lack of electricity, furniture and qualified teachers.
As of mid-2025, only 10 of Nigeria’s 36 state governors had begun paying the ₦70,000 monthly minimum wage. At the same time, 10 states increased their domestic debt by ₦417.7 billion between the first quarter of 2024 and the first quarter of 2025, according to Debt Management Office data.
BudgIT’s 2025 State of States report also showed that no state spent up to ₦10,000 per capita on healthcare in 2024, despite record FAAC inflows. State health budgets totalled ₦1.32 trillion, but actual spending stood at ₦816.64 billion, representing a performance rate of 61.9 percent.
Former Central Bank Governor and 16th Emir of Kano, Muhammadu Sanusi, criticised the Federal Government for continued borrowing despite the savings from subsidy removal.
“If you stop paying subsidies but continue borrowing more, it means you’ve filled one hole only to dig another. The real challenge now is the quality of government spending and the management of the revenues saved,” Sanusi said.
For ordinary Nigerians, the absence of fuel queues has not removed hardship. Petrol, which sold for about ₦184 per litre before subsidy removal, crossed ₦1,300 per litre in May 2026 and has remained around that level, affected by naira depreciation and crude oil price movements.
Transport fares have risen sharply, pushing up food prices and reducing household purchasing power. Traders in major markets in Lagos, Onitsha and Kaduna say inflation has squeezed their profit margins and weakened consumer demand.
“Nobody is fighting to buy petrol anymore,” said Adaeze Okonkwo, a fabric trader in Lagos’s Balogun Market. “But what is the point of fuel in the tank when you cannot afford what the fuel is supposed to help you buy?”
The subsidy removal has therefore delivered a major shift in Nigeria’s petroleum supply system and strengthened government revenues, but the larger question remains whether the gains will be converted into better roads, improved healthcare, stronger schools, lower poverty and visible relief for citizens.
The post “Where Did The Savings Go?” — Three Years After Subsidy Removal, Fuel Queues Disappear But Nigerians Battle Higher Prices And Poor State Spending appeared first on TheNigeriaLawyer.
