Petroleum Subsidy Removal and National Development in Nigeria (2023 - 2025)

Abstract

The correlation between removal of petroleum subsidy and national development in Nigeria in the year 2023-2025 is analyzed in this article. It addresses a key policy concern: did the fiscal and allocative effects of market-based petrol prices lead to greater macroeconomic stability, public finance and citizens' welfare? A documentary, longitudinal research design was used. The main sources of evidence included the Petroleum Industry Act 2021, official Nigerian data, Central Bank of Nigeria reports, fiscal data from the federation, International Monetary Fund country reports, the peer-reviewed literature on energy-subsidy reform, and World Bank Nigeria Development Updates. The evidence was grouped under five outcome domains: fiscal space, price stability, economic growth, household welfare and institutional accountability. This involved descriptive trend analysis, qualitative content analysis, and no causal inference is made as subsidy removal coincided with exchange rate reform, monetary tightening, food supply shocks and insecurity. The results show a mixed development record. The fiscal reform reduced an open-ended fiscal liability, and occurred in the same year as a smaller federal fiscal deficit and a more effective distribution of income. Real GDP growth was still positive and grew in 2024. However, the rate of inflation shot up, transport prices went up, and the losses in purchasing power worsened the situation. It also demonstrates that the formal announcement of the reform is not a key determinant of the developmental value of the reform, but rather the transparency of capturing savings, the credibility of budget execution, the targeted nature of social protection, and investment in transport, power, health, and education and productive infrastructure. The article ends with the conclusion that the removal of the subsidy was not enough for nation development. Fiscal adjustment must be turned into inclusive development by implementing a rules-based subsidy-savings approach, through independent public reporting of the results and by coordinating social protection and structural reform at a scale sufficient to deliver the results.