The Naira Float and Fuel Subsidy Removal

How President Bola Tinubu removed costly fuel subsidies and unified exchange rates in 2023, causing sharp devaluation and inflation, and the debate over short-term pain.

In May 2023, new President Bola Tinubu announced major reforms.

Fuel subsidy removal

Nigeria had kept petrol prices low with subsidies costing billions of dollars a year, sometimes more than health and education spending combined.
Subsidies encouraged smuggling to neighbouring countries.
Tinubu declared the subsidy “gone” in his inaugural speech; petrol prices roughly tripled.

Exchange rate unification

Nigeria had multiple exchange rates, with a large gap between official and parallel rates.
In June 2023, the central bank let the naira float more freely.
The naira lost around two-thirds of its value against the dollar by 2024.

Effects

Inflation exceeded 30 percent in 2024.
Cost of living protests.
Government revenue improved; the parallel market gap narrowed.

The debate

Economists largely supported ending distortionary subsidies and multiple rates.
Critics said reforms lacked cushioning for the poor.

Lesson

Removing long-standing subsidies can be necessary but painful, requiring social protection.

The petrol price shock

A Lagos commuter who paid around 185 naira per litre suddenly pays over 500, raising transport fares across the city.

Thinking removing subsidies has only benefits

It improved finances but caused sharp price rises for households.

Key takeaways

Tinubu removed fuel subsidies in May 2023.
The naira was floated in June 2023 and lost about two-thirds of its value.
Inflation exceeded 30 percent in 2024.
Reforms needed social protection for the poor.