Fuel subsidy removal did not create cash windfall, only reduced borrowing pressure — FG

•Explains rationale for floating naira in an import-dependent economy

THE Federal Government has clarified that the removal of petrol subsidy did not create a large pool of cash at its disposal, but rather reduced a major fiscal burden and the amount of additional borrowing that would otherwise have been required.

The clarification was contained in the Federal Ministry of Finance’s publication, “Nigeria’s Economic Reforms — By the Numbers,” which explained the rationale behind some of the government’s major economic reforms, including petrol subsidy removal and the floating of the naira.

Responding to questions over the financial benefits of subsidy removal, the government said the reform should be understood primarily as a measure to ease pressure on public finances, rather than as a sudden revenue windfall.

It added that the benefits were not limited to the Federal Government, as states and local governments received substantially higher allocations from the Federation Account. These funds, according to the ministry, supported salaries, pensions, infrastructure and other public services, with states taking the largest effective share.

The government also addressed concerns surrounding the N7.13 trillion energy-security expenditure recorded by the Nigerian National Petroleum Company Limited (NNPCL) in 2024. The expenditure was contained in the company’s audit report released in November 2025, although NNPCL did not specify its purpose. Some experts have linked the spending to subsidy-related payments or the protection of gas pipelines.

The ministry said that despite increased revenues following the reforms, government continued to borrow because additional spending requirements exceeded the new resources available.

“Subsidy removal, therefore, cut the borrowing that would…