Subsidy Removal Sparks 92% Fall in Daily Petrol Use

Nigeria's Petrol Consumption Crashes by 92% Post-Subsidy

“Combined with population growth, this means that some 129 million Nigerians are living in poverty...”

Nigeria's Petrol Subsidy Removal: Prices Soar to N1,300/Litre, Inflation Hits 34.19% - President Tinubu's Bold Economic Move

Nigeria's daily petrol consumption has plummeted by 92% since President Bola Tinubu took office on May 29, 2023. The drastic decline is attributed to the removal of fuel subsidies, which led to a significant increase in petrol prices across the country. Data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority reveals that daily petrol consumption dropped to 4.5 million litres as of August 20, 2024, a stark contrast to the 60 million litres per day recorded in May 2023.

The removal of fuel subsidies, announced by President Tinubu during his inauguration speech, marked the end of an era for cheap petrol in Nigeria. The Nigerian National Petroleum Company (NNPC) adjusted retail prices for petrol, with prices ranging between NGN 488/litre in Lagos State to NGN 555/litre in Maiduguri, Borno State. The price hike has been substantial, with the North Central region experiencing a 181% increase, followed closely by the North West and North East regions.

This significant decrease in petrol consumption reflects the impact of the subsidy removal on Nigeria's economy and citizens. While the move aims to reduce the financial burden of subsidies on the government, it has sparked concerns about the hardship faced by Nigerians, particularly low-income households.

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) report reveals a disproportionate distribution of petrol across Nigeria's 36 states. Only 16 states received product allocations from the Nigerian National Petroleum Company Limited (NNPCL) in August. This selective distribution led to severe petrol scarcity in states that were left out.

Niger State topped the allocation list, receiving 21 trucks totaling 940,000 litres daily. Lagos followed closely with 12 trucks (726,001 litres), while Kaduna received 12 trucks (454,001 litres). Other states receiving notable allocations included:

• Oyo: 12 trucks
• Kano: 9 trucks
• Ondo: 6 trucks

Smaller allocations went to:

•  Sokoto
• Ogun
• Osun
• Gombe
• Benue
• Ekiti
• Kebbi

These figures highlight the uneven distribution of petrol across Nigeria, exacerbating scarcity in unaffected states.

President Bola Tinubu's bold move to terminate petrol subsidies on May 29, 2023, marked a significant shift in Nigeria's economic landscape. The subsidy system, which had drained the government's coffers to the tune of approximately N12 trillion over the past decade, was deemed unsustainable and a major contributor to the nation's crippling debt.

The aftermath of the announcement saw petrol prices skyrocket from N195 per litre to a staggering N1,300, sending shockwaves through the economy. This drastic increase fueled headline inflation, which surged to a nearly three-decade high of 34.19% in June. Although it eased slightly to 32.7% in September, the impact of the subsidy removal was undeniable.

However, President Tinubu remains resolute, emphasizing that the move was necessary to curb smuggling activities and redirect funds towards critical infrastructure development. The cancellation of the subsidy has also enabled Nigeria to accurately assess its daily petrol consumption, which has dropped significantly from “several million litres” to around 30 million litres.

Impacts of Subsidy Removal:

Reduced Petrol Consumption: Daily consumption has decreased from several million litres to 30 million litres.

Increased Revenue: Funds previously allocated to subsidies can now be redirected towards infrastructure development and social welfare programs.

Economic Reforms: The move aims to curb smuggling activities and promote transparency in the oil sector.

While the subsidy removal has brought challenges, it's a crucial step towards Nigeria's economic recovery and growth.

The World Bank report read, “With growth proving too slow to outpace inflation, poverty has risen sharply. Since 2018, the share of Nigerians living below the national poverty line16 is estimated to have risen sharply from 40.1 percent to 56.0 percent.

“Combined with population growth, this means that some 129 million Nigerians are living in poverty. This stark increase partly reflects Nigeria's beleaguered growth record. Real GDP per capita has not recovered to the level it was at prior to the oil price-induced recession in 2016.

“The COVID-19 pandemic compounded this drop in economic activity. Moreover, growth is failing to outpace inflation: large increases in prices across almost all goods have diminished purchasing power.

“Multiple shocks in a context of high economic insecurity have deepened and broadened poverty, with over 115 million Nigerians estimated to have been poor in 2023. Since 2018/19, an additional nearly 35 million people have fallen into poverty, so that more than half of Nigerians (51.1 per cent of the population in 2023) are now estimated to live in poverty.”