Nigeria’s removal of petrol subsidies and overhaul of the foreign-exchange market freed an estimated N15.8 trillion for the federation between June 2023 and December 2025, but rising personnel costs and the naira impact of servicing foreign debt have substantially increased government spending pressures.
Official figures released by the Federal Ministry of Finance show that the N15.8 trillion was distributed across the three tiers of government rather than retained as a single pool by the Federal Government.
Of the total, the Federal Government’s estimated share stood at N5.43 trillion, while states received N6.52 trillion and local governments received N3.88 trillion.
The breakdown provides important context to questions surrounding the fiscal benefits of reforms introduced after the removal of petrol subsidies and changes to Nigeria’s foreign-exchange system.
At the federal level, the N5.43 trillion share of the savings was supplemented by N3.12 trillion in other additional revenue and N11.85 trillion in incremental borrowing, taking additional resources available to the Federal Government to approximately N20.4 trillion.
That increase was nevertheless overtaken by additional expenditure pressures of about N30.64 trillion over the period.
Wage-related spending was one of the largest pressures on government finances.
About N9.39 trillion in additional expenditure went to minimum-wage adjustments, wage awards, allowances and related personnel costs.
Another N9.37 trillion represented the additional naira cost of servicing existing foreign-currency debt following the depreciation of the local currency. Combined, the two items amounted to N18.76 trillion.
Infrastructure accounted for another major portion of the increase in expenditure, with approximately N6.47 trillion directed towards strategic projects covering transportation, housing, agriculture, security and other areas.
Government support for electricity consumption added another N3.14 trillion to spending pressures.
The numbers illustrate why the elimination of petrol subsidies did not automatically translate into an equivalent amount of money becoming available for discretionary federal spending.
The savings reduced an existing fiscal burden, while the resulting resources were shared across the federation at a time when the Federal Government was simultaneously confronting higher wages, debt-service costs, infrastructure requirements and other obligations.
States and local governments also benefited from stronger federation allocations following the reforms.
Compared with the monthly distribution levels that existed before subsidy removal, states received an estimated N9.17 trillion in additional allocations between June 2023 and December 2025, while local governments received approximately N6.66 trillion more over the same period.
Despite the improvement in revenue, borrowing remained necessary because expenditure requirements continued to exceed the additional resources generated.
The Ministry of Finance said the fiscal effect of subsidy removal should therefore be understood partly in terms of borrowing that Nigeria would otherwise have needed to undertake had the previous subsidy structure remained in place.
The broader reform programme has also included changes to revenue mobilisation, taxation, monetary financing and the foreign-exchange market as the government seeks to strengthen public finances and reduce distortions across the economy.
For Nigeria, the emerging fiscal picture shows that the N15.8 trillion reform gain provided significant additional resources across the federation, but the simultaneous rise in wages, foreign-debt servicing costs and other expenditure commitments has limited the fiscal room created at the federal level.
