NIGERIA’S average daily petrol consumption has experienced a significant decline of 28 percent since President Bola Tinubu eliminated the popular but costly fuel subsidy at the end of May. Data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) reveals that average daily petrol consumption dropped to 48.43 million litres in June, down from the previous average of 66.9 million litres.
For decades, Nigeria had implemented a subsidy on petrol to maintain affordable prices in Africa’s largest economy. However, the subsidy became increasingly burdensome for the country, resulting in substantial expenditures. The government spent $10 billion on the subsidy last year, leading to wider deficits and a rise in government debt.
The removal of the subsidy has had several effects, one of which is the collapse of a black market in neighbouring C
ameroon, Benin, and Togo. These countries had relied on petrol smuggled from Nigeria, but with the subsidy removal, the incentive for smuggling decreased, resulting in the collapse of the black market.
Despite having spent $2.41bn on the subsidy in the first five months of the year, Nigeria stands to save up to $5.10bn in 2023 from scrapping the petrol subsidy and implementing foreign exchange (FX) reforms, according to the World Bank’s statement on June 27.
The removal of the subsidy and the subsequent decrease in petrol consumption signify a significant shift in Nigeria’s fuel market. The government’s decision aims to address the financial strain caused by the subsidy and reduce government debt, ultimat
ely fostering a more sustainable economic environment for the country.
