The renewed debate over Nigeria’s fuel subsidy has brought fresh scrutiny to how government revenues, oil-sector remittances and subsidy payments are accounted for.
The conversation gained momentum following former Vice President and African Democratic Congress (ADC) presidential candidate Atiku Abubakar’s pledge to restore the subsidy if elected in next year’s general election.
Earlier, a presentation by the Federal Ministry of Finance on the impact of fuel subsidy savings on federation revenues also reignited questions about how the subsidy was funded and what Nigeria has actually saved since its removal.
The ministry deserves credit for attempting to improve transparency around public finances. However, its accounting leaves several important questions unanswered, particularly concerning the structure of fuel subsidy payments before their removal.
How the Subsidy Was Accounted For
Before the subsidy was removed, it was managed through the books of the national oil company, NNPC Limited (NNPCL), rather than through a specific provision in the government’s budget.
The federal and state governments had agreed that subsidy payments would constitute a first-line charge on the federation account. Consequently, the expense did not appear as a conventional budgetary allocation for the federal or state governments.
A clearer accounting framework would have required the federal and subnational governments to formally agree on a sharing formula for subsidy payments from federation account receipts.
The finance minister’s presentation is therefore most useful in explaining the effect of recent foreign exchange reforms on nominal government revenues, particularly before accounting for inflation and the depreciation of the naira.
But this alone does not establish how much Nigeria saved from ending the fuel subsidy.
What Happened to NNPCL Remittances?
A central question remains: Did the removal of the subsidy, which eventually happened in 2024, increase the money flowing from NNPCL into the federation account?
Answering that question requires a detailed examination of NNPCL’s transfers to government and the sources of the funds used to finance the subsidy before its removal.
This is particularly important because NNPCL’s scheduled contributions to the federation account would not have come exclusively from subsidy savings.
It is also necessary to establish how much was spent on subsidy payments, particularly during the final year of the scheme, and whether the government had accumulated any outstanding obligations to NNPCL.
Other policy changes have further complicated the picture.
An executive order signed early this year stopped NNPCL from charging 30 per cent of the federation’s oil revenues as a management fee on profit oil and profit gas derived from production sharing contracts, profit sharing contracts and risk service contracts.
The reform was designed to increase the funds available to the federation account.
Therefore, even if NNPCL’s remittances have increased, the source of that increase must be established before attributing it to subsidy removal.
Oil Revenue Gains Need Clearer Accounting
The critical question is whether higher NNPCL remittances are directly linked to the abolition of fuel subsidies or to other developments that have improved the corporation’s ability to transfer more money to government.
Several factors could independently increase NNPCL’s remittances.
If the corporation is selling more crude at higher prices, its revenues would ordinarily rise. Similarly, if it is no longer paying asset management fees at previous levels, that could improve the revenue available to government.
Neither development would necessarily be a direct consequence of fuel subsidy removal.
The corporation’s own accounts therefore remain crucial.
Fuel subsidy costs appeared under different descriptions over the years, including “under-recovery”. A proper assessment would require comparing NNPCL’s accounts before 2024 with its more recent financial statements to identify the amounts directly attributable to subsidy payments.
Only after establishing those figures can Nigeria credibly determine the savings generated by subsidy removal.
₦7.1tn Energy Security Cost Raises Questions
The accounting becomes even more complicated when NNPCL’s previous claims are considered.
The corporation had previously indicated that the amounts it received or recovered did not fully cover its subsidy payments. A former finance minister also argued that Nigeria was borrowing to fund the subsidy.
These claims raise important questions about where the subsidy money came from and how the payments affected the country’s borrowing requirements.
The finance minister, as an accountant, is well placed to reconstruct NNPCL’s accounts from 2022 and 2023 and compare them with the 2025 figures.
Without such a reconstruction, it remains difficult to fully understand the ₦7.1 trillion energy security expense reported in NNPCL’s 2024 audited financial statements, compared with ₦4.8 trillion in 2023.
The expense was attributed to a barrels-for-security arrangement and what the editorial describes as a return of subsidy deductions through alternative channels.
The key questions remain: How much was NNPCL actually paying as subsidy? Where did the money come from? And if subsidy payments have fallen, how much has Nigeria’s borrowing requirement declined as a result?
Did Subsidy Removal Reduce Borrowing?
Two possibilities need to be examined.
The first is that Nigeria is borrowing less because subsidy removal has freed resources for government.
The second is that the country is spending more, thereby limiting any reduction in borrowing despite increased revenues.
A preliminary assessment may not show a clear reduction in borrowing that can be directly attributed to additional resources created by subsidy removal.
Government supporters argue that borrowing requirements may remain elevated because Nigeria is spending more to address growing development challenges, including those associated with a rising population.
But this makes the fiscal picture even more difficult to assess.
It is necessary to determine how much public borrowing is being used for capital formation and how much continues to finance recurrent expenditure.
The impact of higher oil prices since the Third Gulf War and increased oil production since 2023 must also be separated from the effect of subsidy removal.
More importantly, the Ministry of Finance needs to distinguish between the impact of removing the fuel subsidy and the broader effects of foreign exchange reforms on government finances.
More Transparency Is Needed
The finance minister’s effort to improve public accountability is commendable. However, combining several distinct factors into an explanation of the fiscal impact of subsidy removal risks obscuring rather than clarifying the issue.
Nigeria needs a transparent reconstruction of the subsidy accounts, NNPCL’s remittances, government borrowing and the various policy changes that have affected federation revenues.
Only then can the country determine how much it actually saved from subsidy removal and how those savings have affected public finances.
The subsidy debate should therefore move beyond political claims and headline figures.
What Nigeria needs is a complete and verifiable fiscal account that clearly separates subsidy savings from higher oil revenues, exchange-rate reforms, increased production and other changes in government finances.
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