Despite sweeping reforms that ended Nigeria’s long-standing fuel subsidy regime, many citizens are yet to feel the full economic impact of the policy shift, an economist and energy expert, Kelvin Emmanuel, has said.
Mr Emmanuel, who is the co-founder and CEO of Diary Hills, said even though the removal of the fuel subsidy was a good decision, Nigerians are yet to feel the positive impact of the policy.
Emmanuel, who featured on Channels Television’s breakfast show, Morning Brief, on Tuesday, February 17, noted that the fuel subsidy removal helped to liberalise the midstream and downstream petroleum sector, creating opportunities for increased productivity and a boost to the economy.
He, however, stated that the government has failed to account for crude oil barrels that were used under the Domestic Crude Intervention stock for crude swap for subsidy payments.
“Even though the fuel subsidy removal was a good decision, which I supported and still support till today, because it has liberalised the midstream and downstream sector, I still do not think that Nigerians are feeling the impact of the subsidy removal because the government cannot account for the crude oil barrels that were used under the Domestic Crude intervention stock for crude swap for subsidy,” Emmanuel stated.
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He insisted that the government must account for the crude oil barrels used for crude swap deals for subsidy payments.
Prior to the resumption of domestic refining, Nigeria was into the practice of swapping crude oil for refined petrol, known as the Direct Sale Direct Purchase (DSDP) arrangement. For decades, Nigeria allocated 445,000 barrels per day (bpd) of crude oil to the Nigerian National Petroleum Company (NNPC). Since the country’s four state-owned refineries were largely non-functional, the NNPC used this “domestic crude allocation” for swaps.
NNPC delivered crude to international traders or refiners. In return, the traders delivered an equivalent value of refined petrol (PMS) back to Nigeria. When the landing cost of this petrol was higher than the government-regulated pump price, the difference (subsidy gap) was deducted from the value of the crude oil before the remaining proceeds reached the Federation Account.
Emmanuel stated that when the government implemented section 205 of the PIA and stopped providing for under recovery, it meant that those barrels that were used for crude oil swaps to pay petrol subsidies were now removed for that purpose. “Now the question we should ask the government is, where are those barrels, and why is it not captured in FAAC?” he asked.
Other economists, civil society groups and even the Nigerian Senate have consistently demanded that the Federal Government and the Nigerian National Petroleum Company Limited (NNPCL) provide a transparent accounting of crude oil barrels used for swap deals.
The core of their argument is that while the government officially removed subsidies in May 2023, the financial mechanics used to stabilise petrol prices (often called under-recovery) continue to consume vast amounts of crude oil revenue that should otherwise hit the Federation Account.
Fuel Subsidy Removal and Impact – Inflation
The administration of Bola Tinubu announced the removal of the petrol subsidy in May 2023, a move that immediately triggered a sharp rise in pump prices across the country. The decision marked a historic break from decades of government spending aimed at keeping fuel prices artificially low in Africa’s largest oil-producing nation.
Fuel subsidies had long been criticised for straining public finances. The Nigerian government spent trillions of naira annually maintaining the subsidy, funds that economists argue could have been redirected to infrastructure, healthcare, and education.
The increase in transportation fares as a result of the fuel price hike after subsidy removal affected the cost of goods and services, leading to a spike in the inflation rate. Small businesses, which rely heavily on petrol and diesel to power generators amid an unreliable electricity supply, continue to struggle with increased operating expenses.
Why Inflation Rate surged
Nigeria’s inflation had remained elevated, reaching a 28-year high of 34.80 per cent in December 2024 before the Consumer Price Index (CPI) was rebased in January 2025, which led to a sharp drop. Since then, the inflation rate has been on a downward trajectory.
The CPI report released by the National Bureau of Statistics (NBS) on Monday, February 16, showed that the headline inflation dropped to 15.1 per cent in January 2026, while food inflation dropped year-on-year to a single digit of 8.89 per cent.
While commenting on Nigeria’s inflation trajectory, Emmanuel stated that apart from subsidy removal, which led to a sudden hike in the cost of things, it can also be traced to what he described as “the abuse of Ways and Means” advances by the CBN.
He observed that the inflation rate accelerated in 2019 when about ₦17 trillion was pumped into the economy and there was no real sector production that accelerated as fast as the money supply that was injected into the system. “And because there was no real sector productivity to match the increase in money supply, inflation was the natural result,” Emmanuel stated.
He said that between 2019 and 2022, the CBN advanced the federal government of Nigeria an equivalent of $53 billion through Ways & Means.
“All of that cash that was pumped into the system really jerked up inflation numbers in Nigeria because the real sector productivity was not growing as fast as it should,” he insisted.
He said the CBN Act provides that the Federal Government cannot borrow more than 5 per cent of its revenue in the previous accounting year from the CBN and it must be paid back within 12 months.
According to him, relying on CBN’s Ways and Means as a temporary tool to meet up with deficits in the budget is not a sustainable strategy.
He said the best thing the government can do is to ramp up revenue generation by collecting taxes or by getting money from the oil and gas sector through dividends and other means.
Victor Ezeja is a passionate journalist, scholar and analyst of socioeconomic issues in Nigeria and Africa. He is skilled in energy reporting, business and economy, and holds a master's degree in mass communication.
