Fuel Subsidy Removal's Evolution, Dimensions, and Effects on Nigeria's Socio-Economic Groups

Abstract

Nigeria's fuel subsidy system began in 1977 when General Olusegun Obasanjo's military government institutionalized governmental control over petroleum prices. The subsidy scheme was initially financially workable, but over time, growing demand, reliance on imports, currency devaluation, and ongoing inefficiencies in local refining made it more and more unsustainable. As a result, government fuel subsidy spending skyrocketed to trillions of naira by 2023. President Bola Ahmed Tinubu abruptly eliminated the petroleum subsidy on May 29, 2023, as a result of the mounting economic burden of these subsidies throughout the Fourth Republic (1999–2023). The socioeconomic and industrial effects of Nigeria's removal of fuel subsidies between 2023 and 2024 were investigated in this study. The study evaluated the costs and advantages of the reform across various social groups and economic sectors using a desktop research methodology based on George Homans' Social Exchange Theory. The results show that the program had serious negative consequences on vulnerable groups and important industries due to its bad conception, poor planning, and poor execution. Overall, the withdrawal of the subsidy had more negative social and economic effects than positive ones. In order to better link future reforms with the objectives of enhancing national security, economic stability, and citizen welfare, the study suggests reevaluating the strategy.