When the Nigerian government scrapped the decades-old fuel subsidy in 2023, it promised relief for the nation’s bleeding finances. Nearly $10 billion was to be freed up annually, and by scrapping it, President Bola Tinubu’s administration projected that the fiscal space created could be channeled into education, infrastructure, social investment, and healthcare.
The International Monetary Fund (IMF) and the World Bank praised the move as a sign of long-awaited economic discipline. But the move, championed as a patriotic sacrifice, came with painful consequences: fuel prices quintupled, increasing by about 514 percent from N175 in May 2023 to N900 as of today; inflation is now at 21.88 percent, and the cost of living hit historic highs, inflicting more pain on the already impoverished Nigerians.
But one year later, one critical figure exposes a troubling paradox: Nigeria’s Federal Reserve remains stuck at around $41.046 billion, almost the same level as before subsidy removal. For many Nigerians, the obvious question is, where did the money go?
The Numbers Don’t Add Up
Officially, subsidy removal was meant to ease fiscal pressure and rebuild foreign reserves. Yet, the reserves have barely moved, even as citizens endure economic hardship.
Independent economists argue that the supposed “savings” are being quietly swallowed by corruption, inefficiency, and shadowy financial obligations.
“The government keeps announcing that billions are saved, but the reserves don’t reflect it, and the people don’t feel it,” says Abuja-based analyst Dr. Nnamdi Okeke. “It raises the suspicion that subsidy savings have simply disappeared into the same black hole of mismanagement.”
Debt and Dollar Drain
One explanation offered by officials is debt servicing, which consumes a staggering portion of national revenue. But critics argue that this alone cannot account for the stagnant reserves. Instead, they point to:
– Opaque fuel import contracts that continue despite subsidy removal, with Nigeria still importing refined petroleum.
– Unaccounted forex interventions by the Central Bank of Nigeria, where billions vanish into stabilizing the naira with little transparency.
But recently, the CBN governor, Yemi Cardoso who spoke at the spring meetings of the IMF and the World Bank, disclosed that the naira is performing independently, as the apex bank’s key monetary policies salvaged the naira from devaluation and not because the foreign reserves were used to defend it.
– Leakages and corruption within ministries and agencies that fail to publish clear records of subsidy savings and allocations.
– Shoddy revenue-sharing formulas that become “loot-sharing formulas.” Part of the tragedy is that while the revenue generated is expected to be channeled to federal reserves, it is often diverted into corrupt networks; the elite share billions; the people face poor roads, underfunded hospitals, failing schools, and mass unemployment.
The government has increasingly turned to borrowing as its lifeline for development.
From highways and railways to schools, hospitals, and social investment schemes, government loans -both domestic and foreign as the engine behind many of the country’s most ambitious projects. With the rising debt profile, the question again is, where did the subsidy removal fund go?
“There’s no transparency,” says an insider at the Ministry of Finance, speaking anonymously. “The books are not open. Nigerians are told savings exist, but there’s no breakdown, no audit, and no accountability. Meanwhile, reserves are flatlined.”
Citizens Pay, Elites Gain
The removal of subsidies has hit citizens hardest. Transport fares have doubled, food prices are suffocating households, and SMEs are shutting down. Yet, elite profiteers in oil importation, government contracts, and currency speculation continue to thrive.
“It feels like the sacrifice of millions is subsidizing corruption, not the economy,” laments Port Harcourt-based teacher Chika Nwankwo. “We tightened our belts, but the politicians keep widening theirs.”
Lessons from other Crude Oil-Producing Nations
Other nations that are yet to fully remove subsidies, like Saudi Arabia and Indonesia, but have significant reforms underway, have steadily grown their foreign reserves to the tune of $410 billion and $153 billion, respectively. These countries paired the reform with clear reinvestment into social welfare and infrastructure, making the benefits visible to offset the economic impact on vulnerable populations and ensure broader public support. Indonesia, for instance, expanded social assistance programs and shifted towards direct household subsidies, while Saudi Arabia focused on providing alternative energy sources and other measures to support its citizens.
In Nigeria, however, the absence of transparency and targeted relief has turned reform into a source of anger and suspicion.
The Auditor General’s office has not published a comprehensive account of how subsidy savings were used. Civil society groups are now demanding independent investigations, fearing that the billions have been misappropriated.
FAAC Allocations: Higher Revenue, Same Mismanagement
To be fair, one area where subsidy removal is visible is in the Federation Account Allocation Committee (FAAC) disbursements. Since 2023, allocations to federal, state, and local governments have significantly increased, with record revenues shared across the three tiers of government.
But this “windfall” has not translated into reserve growth or tangible improvements in citizens’ lives. Instead, fiscal leakages, wasteful spending, and reckless recurrent expenditures have absorbed much of the extra revenue.
Analysts warn that without discipline, the increased FAAC allocations only fuel the same old cycle: more money in government hands, but little to show in infrastructure, education, healthcare, or poverty reduction.
A Hollow Reform?