Nigeria Spends N3.5 Trillion on Fuel Importation Since Subsidy Removal

Nigeria's expenditure on fuel imports reached a staggering N3.5 trillion in the latter half of 2023, following the removal of fuel subsidies announced during the Tinubu administration. The decision, made on May 29, 2023, set off a chain of reactions, initially tripling fuel prices and subsequently impacting various sectors.

The National Bureau of Statistics reported that throughout 2023, Nigeria incurred approximately N7.5 trillion in fuel import costs, compared to N7.7 trillion the previous year. Notably, fuel importation costs in the second half of the year amounted to N3.5 trillion, a decrease from the N3.9 trillion recorded in the first half. This translates to roughly $7.7 billion spent on fuel importation for the year, using the 2023 exchange rate.

The removal of subsidies and subsequent price hikes led to an increase in the inflation rate, rising from 22.41% in May 2023 to 29.9% by January 2024. Nigeria's dependence on petroleum imports has persisted for nearly two decades due to refinery inefficiencies, despite the anticipated commencement of operations at the Dangote Refinery.

Although some reports suggest that subsidy removal may decrease demand for petroleum products due to higher prices, the depreciation of the naira has led to increased costs in importing these products, exacerbating demand pressures on the US dollar.

Data analysis reveals that over the past five years, Nigeria has spent a total of N23.5 trillion on fuel imports, with 2022 and 2023 accounting for over half of this expenditure at N15.2 trillion. This surge is primarily attributed to the naira's depreciation against the dollar, resulting in higher costs in naira terms for fuel imports.

Looking ahead, Nigeria anticipates continued fuel imports until the full operations of the Dangote Refinery and increased domestic supply. However, it is projected that both the volume and cost in naira of these imports will decrease, thereby alleviating demand pressures on the dollar.