Fuel subsidy removal pushed poverty rate by 63% – Report

A recent study has indicated that the removal of petrol subsidy significantly worsened living conditions for many Nigerians, pushing the poverty rate to about 63 percent before government support measures were introduced

The findings were shared during a Stakeholders’ Dialogue organised by Agora Policy in Abuja. The event focused on the theme Sustaining and Deepening Economic Reforms in Nigeria.

The research, presented by Mohammed Shuaibu of the University of Abuja, analysed the economic and social effects of key policy changes implemented by the federal government, including the removal of fuel subsidy and adjustments to electricity tariffs.

According to Shuaibu, the decision to end the petrol subsidy led to widespread increases in prices across different sectors, which weakened household purchasing power and deepened poverty levels.

“After the subsidy removal, poverty increased from a baseline of about 50 per cent to 63 per cent. However, when social protection measures such as cash transfers were introduced, the poverty rate moderated to around 56.2 per cent.”

Although the social intervention programmes helped reduce some of the pressure, the study noted that their impact remained limited due to delays in implementation and the relatively small scale of assistance provided.

Shuaibu explained that while the reforms were designed to correct long-standing economic imbalances, they produced harsh short-term consequences, particularly for low-income households.

The research further showed that wealthier households were largely shielded from the immediate economic shock, while poorer families faced rising costs and reduced consumption.

“Across the board, household consumption declined following both the subsidy removal and electricity tariff adjustments. However, social transfers helped cushion the impact, especially for low-income households.”

The report also evaluated the broader economic implications of the electricity tariff reform. It found that the policy initially increased consumer prices by around 0.26 percent, which later rose to about 0.52 percent after social support measures were factored in.

Despite the price pressure, the reform slightly boosted economic output. The study estimated that real Gross Domestic Product saw a modest increase of about 0.42 percent under the reform scenario, before easing to around 0.21 percent.

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