Nigeria's Fuel Subsidy Talk Ahead of 2027: What Needs to Happen

As the 2027 political season heats up, the issue of fuel subsidy removal has come back into focus. Atiku Abubakar has suggested a "targeted" subsidy plan to help citizens cope with the ongoing cost-of-living crisis. President Tinubu is still supporting the 2023 decision, claiming it has increased resources for states, helped them pay salaries, funded NELFUND and social programs, and allowed for major infrastructure projects. Both sides miss the bigger question: not if subsidy removal was right, but if the funds saved are being used to build things that really lower the cost of living in Nigeria.

A subsidy system that used trillions of naira each year was not sustainable. This was the point I made in an earlier piece, "Can Nigeria’s 2023 Reforms Still Be Turned into a Development Dividend?" Three years later, that view remains valid. Yet, Nigeria has not set up a solid framework to make sure a portion of the money saved from the subsidy goes into investments that boost productivity. The Federal Ministry of Finance's "By the Numbers" gives us some clarity. It shows that ₦15.8 trillion in subsidy savings went to the federation from June 2023 to December 2025. Out of this, ₦5.43 trillion went to the Federal Government, ₦6.52 trillion to states, and ₦3.88 trillion to local governments. The Ministry has also framed the subsidy removal as a way to cut borrowing, not just a big cash pool for the federal government. This idea supports the need for a single fiscal agreement across the federation, where states and local governments commit to investing a set part of the savings into projects that improve productivity.

Transportation is the key area where this matters. Nigeria’s inflation is tied closely to the cost of moving goods, food, and people. Recent reports highlight bad roads on routes like Benin-Asaba, Lagos-Benin, and Benin-Agbor. These problems show not just a transport issue but a crisis in infrastructure and consumption. When bad roads lead to long travel times, wasted fuel, and higher logistics costs, consumers bear the burden. For a country that removed fuel subsidies to save money and improve the economy, letting these infrastructure issues continue is a big contradiction.

The Federal Ministry of Finance reports that around ₦6.47 trillion has been spent on important infrastructure like the Lagos, Calabar Coastal Highway and the Sokoto, Badagry Superhighway. While this is a good start, it is not enough. Nigeria needs a system where roads, rail, waterways, and public transport work together. Without this, the country will keep spending a lot to support an inefficient system.

There is a lesson for the 2027 elections. Bringing back a broad subsidy or a vague "targeted" one could undo the progress made by the 2023 reform. "Targeting" may sound reasonable, but it assumes that Nigeria has the necessary systems in place. We still lack a reliable way to identify the poor and verify their purchases against subsidies. Many transactions are cash-based and informal, making it hard to enforce means-testing at the pump. The real question is not if subsidies should return, but how Nigeria can show the benefits of their removal in everyday life.

The Tinubu administration deserves some credit for making a decision that past governments avoided and for starting to account for the resources after reform. But recognizing progress does not mean we should stop questioning. Nigerians were told that the pain of subsidy removal would be like the pain of childbirth, a sharp pain but temporary. Three years later, many households still feel that pain, and the political leaders have not shown that they are sharing in the sacrifices.

The states need to set aside a certain part of the savings from subsidy removal specifically for transportation. This money should be used to fix existing highways, promote CNG and electric public transport, and develop our rail system. Nigeria must create a real transportation plan that involves the federal government, states, and the private sector, focusing on public transit instead of random investments. If done correctly, this could help lower transport-related inflation that is affecting households more than the subsidy removal itself.

The Tinubu administration deserves some credit for making a decision that past governments avoided and for starting to account for the resources after reform. But recognizing progress does not mean we should stop questioning. Nigerians were told that the pain of subsidy removal would be like the pain of childbirth, a sharp pain but temporary. Three years later, many households still feel that pain, and the political leaders have not shown that they are sharing in the sacrifices. Worse still, many states have expanded their tax collections after subsidy removal, putting more pressure on families who are already dealing with the challenges of subsidy removal and the falling value of the naira, with little proof that the extra money is being used to improve roads, public transport, and services that could lower living costs.

Nigeria has already cut out a subsidy that was not sustainable. The real challenge is whether the money saved will lead to lower transport costs, stronger industries, and better public services. The National Economic Council is where the federal government and all 36 governors can meet to work out binding investment and transparency commitments tied to the savings from subsidy removal. Without this, Nigeria risks winning the fight against a bad subsidy system while losing the bigger battle for sustainable growth. So, as we look to 2027, the question should not be if subsidies should come back, but whether Nigeria can finally turn the pain of reform into benefits that make living cheaper, production more competitive, and the economy stronger.