Nigeria’s Senate has uncovered fresh details about the enormous cost of fuel subsidies, revealing that the country spent ₦1.16 trillion (about $2.8 billion at the 2021 exchange rate) to keep petrol prices low in 2021. The disclosure has reignited concerns over the long-term impact of subsidy payments on Africa’s largest economy and raised new questions about how billions of naira generated from crude oil sales were managed.
The revelation came during an investigative hearing by the Senate Public Accounts Committee, which is reviewing audit reports on Nigeria’s oil and gas sector covering the period from 2021 to 2023. The investigation is based on reports prepared by the Nigeria Extractive Industries Transparency Initiative (NEITI), an agency responsible for promoting transparency and accountability in the country’s extractive industries.
Presenting findings before the committee, the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Dr. Mohammed Shehu, said the federal government spent ₦1.16 trillion on fuel subsidies in 2021 alone. The subsidy was introduced to cushion the effect of rising global oil prices by ensuring that Nigerians paid less for petrol than the actual market cost.
While the policy helped keep fuel prices relatively affordable, it also placed enormous pressure on public finances. Experts have long argued that subsidy payments consumed funds that could have been invested in critical sectors such as healthcare, education, infrastructure, electricity, and job creation. The latest figures presented before the Senate provide another indication of the scale of resources committed to maintaining the policy.
Beyond the subsidy itself, Shehu informed lawmakers that another ₦1.20 trillion was deducted from proceeds generated through the sale of Nigeria’s crude oil before revenues were shared among the three tiers of government. Such deductions, he explained, significantly reduced the amount available for distribution through the Federation Account.
The presentation further showed that several operational expenses also reduced oil revenues during the period under review. According to the RMAFC chairman, ₦16.20 billion was lost through crude oil and petroleum product losses, while ₦22.05 billion was spent on repairing damaged oil pipelines across the country. An additional ₦6.75 billion went into maintaining Nigeria’s strategic petroleum stock, which serves as a reserve during emergencies or supply disruptions.
Another major issue raised during the hearing was the calculation of the constitutional 13 percent derivation fund allocated to oil-producing states. Shehu argued that the current method of calculating the derivation after various deductions have been made contradicts the original intention of the constitutional provision.
According to him, the derivation principle was designed to ensure that communities and states producing Nigeria’s oil receive a fair share of the revenue generated from their natural resources. However, calculating the allocation only after multiple deductions significantly reduces the amount eventually paid to those states, a practice he said undermines the objective of the policy.
The Senate committee is examining these financial transactions as part of a broader effort to strengthen transparency in Nigeria’s oil and gas industry, which remains the country’s largest source of government revenue and foreign exchange earnings. Lawmakers say identifying weaknesses in the management of oil income is essential to improving public confidence and ensuring that national resources are properly accounted for.
During the hearing, members of the committee also postponed consideration of a report submitted by the Niger Delta Development Commission (NDDC). The committee explained that lawmakers needed additional time to study the document before inviting officials of the commission to continue their presentation on August 12.
The session also exposed tensions between the Senate committee and the Office of the Auditor-General of the Federation. Committee Chairman Senator Ibrahim Dankwambo expressed dissatisfaction over the failure of the Auditor-General to appear before the panel or send a representative despite being invited.
Describing the absence as unacceptable, Dankwambo warned that the Auditor-General must attend the committee’s next sitting or face compulsory appearance through the constitutional powers granted to the National Assembly. He stressed that every public institution involved in managing Nigeria’s finances must cooperate fully with legislative oversight in the interest of accountability.
The renewed scrutiny of subsidy spending comes at a time when Nigeria is pursuing sweeping economic reforms aimed at reducing government expenditure, improving fiscal discipline, and attracting investment. Although the country has moved away from the costly fuel subsidy regime in recent years, lawmakers believe reviewing past expenditures remains important to understanding how public funds were managed and to preventing similar fiscal challenges in the future.
For many analysts, the figures presented before the Senate highlight the enormous financial burden fuel subsidies placed on Africa’s largest oil producer. They argue that greater transparency in the management of oil revenues, stronger oversight of public institutions, and reforms in the petroleum sector will be crucial if Nigeria is to maximise the benefits of its vast energy resources while improving economic development for its more than 230 million citizens.
