Fuel Subsidy Removal in Nigeria: A Comparative Macroeconomic Policy Analysis

This study critically examines Nigeria’s 2023 fuel subsidy removal, one of the most consequential macroeconomic changes in the nation’s recent history. The study explores the reform’s immediate and long-term implications on fiscal sustainability, inflationary trends, poverty levels, and inclusive growth. Drawing insights from the experiences of Ghana and Indonesia, the paper takes a comparative approach to highlight best practices and pitfalls in managing subsidy transitions across developing economies. The conceptual framework explains key terms such as fuel subsidy, fiscal sustainability, inflationary pressure, and social safety nets, creating the analytical lens through which Nigeria’s policy is evaluated. Methodologically, the study draws on a review of secondary data, comparative policy analysis, and theoretical insights into fiscal management and social protection. This triangulation provides a balanced knowledge of the policy’s outcomes and challenges. Findings show that while subsidy removal alleviates unsustainable fiscal burdens and creates fiscal space, the absence of strong safety nets, transparent reinvestment mechanisms, and effective macroeconomic stabilization has intensified inflation and deepened poverty in Nigeria. Comparative lessons from Ghana and Indonesia show that subsidy reforms succeed only when governments accompany them with robust social protections, credible governance structures, and visible reinvestment in public goods. The paper finds that subsidy removal in Nigeria represents both a fiscal necessity and a social dilemma. To translate fiscal savings into sustained development, the study suggests targeted cash transfers, infrastructural investments, transparent allocation of savings, and strengthened government. These measures, if implemented, can turn fiscal consolidation into inclusive growth and national development.