63% of Nigerians Now Poor as a Result of Petrol Subsidy Removal — Study Reveals

By Emmanuel Kwada

A groundbreaking independent study has exposed the harsh short-term human cost of Nigeria’s ambitious economic reforms, showing that the national poverty rate skyrocketed to approximately 63% immediately after the federal government’s removal of petrol subsidies in 2023.

The research, conducted by Dr. Mohammed Shuaibu, Senior Lecturer in the Department of Economics at the University of Abuja, was presented yesterday during a high-profile stakeholders’ dialogue hosted by Agora Policy in Abuja.

The event, themed “Sustaining and Deepening Economic Reforms in Nigeria,” gathered policymakers, economists, civil society leaders, private sector representatives, and international experts to evaluate the ongoing effects of President Bola Tinubu’s reform program.

Dr. Shuaibu’s analysis, which integrated quantitative economic modeling with qualitative data from focus group discussions across Nigeria’s six geopolitical zones, found that the poverty headcount rose sharply from a pre-reform baseline of about 49.8% (roughly 50%) to 63% in the immediate aftermath of the subsidy removal.

This dramatic increase stemmed primarily from cascading price hikes in fuel, transportation, food, and other essentials, which devastated household purchasing power especially among low-income and rural families.

“After the subsidy removal, poverty increased from a baseline of about 50 per cent to 63 per cent,” Dr. Shuaibu stated. Low-income households suffered the most, with poverty levels in this group climbing from around 50% to roughly 63%, while higher-income groups were largely shielded by stronger financial reserves.

The study also documented a deepening of poverty, as evidenced by the poverty gap a measure of how far below the poverty line the poor fall widening from 31.6% pre-reform to over 45% post-removal.

This indicates that not only were more Nigerians pushed into poverty, but those already poor sank even further into deprivation.

Subsequent government interventions, particularly cash transfers and other social protection palliatives, provided some relief, moderating the poverty rate to around 56.2%.

However, Dr. Shuaibu noted that these measures were hampered by implementation delays, limited coverage, inadequate scale, and difficulties in accurately targeting the most vulnerable through the National Social Register.

Focus group participants described widespread survival tactics: slashing food and non-essential spending, cutting back on transport, rationing electricity, borrowing heavily, or relying on informal family and community networks.

Many households reported receiving little or no direct government support, prompting Dr. Shuaibu’s stark observation: “Households adjusted to the shocks not through recovery but through sacrifice.”

While electricity tariff adjustments contributed only modestly to consumer price increases (initially about 0.26%, later rising to roughly 0.52% after social measures) and delivered small positive impacts on real GDP (an estimated 0.42% boost, reduced to 0.21% when social costs were included) and business investment, the petrol subsidy removal exerted a strong contractionary effect.

It drove inflation, elevated business operating costs, and forced many firms to raise prices, lay off workers, close operations, or shift to more expensive alternative energy.

Experts at the dialogue defended the reforms’ necessity amid inherited crises, including collapsing oil revenues (from $92 billion in 2012 to under $2 billion in 2023), massive foreign exchange backlogs, and subsidy plus exchange rate distortions costing an estimated 6% of GDP annually.

Central Bank of Nigeria Deputy Governor for Economic Policy, Dr. Muhammad Abdullahi, highlighted macroeconomic gains: inflation declining for 19 consecutive months (approaching single digits, with food inflation at its lowest in 13 years), strengthened foreign reserves (reported at $32 billion, though partly borrowed), and rising non-oil exports.

Dr. Chinyere Almona, Director-General of the Lagos Chamber of Commerce and Industry, acknowledged annual savings from subsidy removal of about $7.5 billion but cautioned: “The economy is improving at the macro level, but that improvement has not trickled down to the common man and many small businesses.” She urged better channeling of savings into infrastructure and improved credit access for the private sector.

World Bank Senior Economist Dr. Samer Matta called for expanded and better-targeted social protection programs to ensure more inclusive growth.

Participants stressed the importance of gradual future reforms, robust upfront safety nets, transparent communication, and evidence-based policymaking to balance fiscal sustainability with social equity.

The Agora Policy dialogue, supported by the Nigeria Economic Stability and Transformation programme and the UK’s Foreign, Commonwealth and Development Office, sought to promote constructive dialogue on these critical issues.