A new study has revealed that about 63 per cent of Nigerians fell below the poverty line following the removal of petrol subsidy, highlighting the severe welfare impact of the country’s recent economic reforms.
The research was presented on Thursday at a stakeholders’ dialogue organised by Agora Policy in Abuja. The study showed that the national poverty headcount rose sharply from a baseline of about 49.8 per cent to roughly 63 per cent after the subsidy removal.
The event, themed “Sustaining and Deepening Economic Reforms in Nigeria,” brought together policymakers, economists, civil society leaders and private sector representatives to examine the impact of the Federal Government’s reform agenda.
Among those present were the Deputy Governor for Economic Policy at the Central Bank of Nigeria, Muhammad Abdullahi; the Special Adviser to the President on Finance and Economy, Sanyade Okoli; the World Bank Senior Economist for Nigeria, Samer Matta; the Country Director of CARE International, Hussaini Abdu; and the Executive Director of Agora Policy, Waziri Adio.
The study was presented by a Senior Lecturer at the Department of Economics, University of Abuja, Mohammed Shuaibu. It examined the economic and social consequences of key reforms introduced by the Federal Government, including the removal of petrol subsidy and adjustments in electricity tariffs.
President Bola Tinubu announced the end of petrol subsidy during his inaugural address on May 29, 2023. According to the study, the policy triggered widespread price increases across the economy and significantly affected household welfare.
“After the subsidy removal, poverty increased from a baseline of about 50 per cent to 63 per cent,” Shuaibu said.
He explained that the introduction of social protection measures helped soften the impact, but did not completely reverse the worsening welfare conditions.
“However, when social protection measures such as cash transfers were introduced, the poverty rate moderated to around 56.2 per cent,” he added.
The findings showed that the effects of the reform were uneven across income groups. High-income households were largely insulated from the shocks, while low-income households experienced the most severe erosion of purchasing power.
According to the study, poverty among low-income households rose sharply from about 50 per cent before the subsidy removal to roughly 63 per cent afterwards. At the same time, the national poverty gap widened significantly.
The poverty gap increased from 31.6 per cent to more than 45 per cent following the policy change, indicating deeper levels of deprivation among poor households.
Although social transfers slightly reduced the gap, the improvement remained limited due to delays in the rollout of intervention programmes and the relatively small scale of support provided.
The study also examined how the reforms affected household consumption patterns. It found that consumption declined across income groups after the removal of the subsidy and the adjustment of electricity tariffs.
“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,” Shuaibu explained.
The decline in consumption was particularly severe among rural and low-income households, where rising energy and transport costs significantly reduced spending capacity. Urban low-income households also experienced declines in consumption, although the effect was slightly moderated in areas where social transfers were implemented.
Beyond household welfare, the research assessed the broader macroeconomic consequences of electricity tariff reforms.
The analysis found that electricity tariff adjustments resulted in a modest increase in consumer prices, initially raising prices by about 0.26 per cent, which later rose to roughly 0.52 per cent after social protection measures were included.
However, the reform also produced a small positive effect on economic output. Real Gross Domestic Product increased by about 0.42 per cent under the reform scenario before moderating to around 0.21 per cent when social protection programmes were factored into the model.
Firm-level investment also recorded slight gains following the electricity tariff adjustments, although these improvements were partly offset by the cost of implementing social protection programmes.
In contrast, the removal of the petrol subsidy had a contractionary effect on economic activity, as rising fuel prices and transport costs triggered inflationary pressures that weighed on business activity and investment.
The study also incorporated insights from focus group discussions conducted across Nigeria’s six geopolitical zones. Participants acknowledged the need for reforms due to the country’s fiscal and macroeconomic challenges, but many criticised the speed at which the policies were introduced.
According to Shuaibu, many households were forced to adopt survival strategies as the reforms rapidly eroded purchasing power.
“Households adjusted to the shocks not through recovery but through sacrifice,” he said.
The study found that many families responded by cutting consumption, reducing transport use, rationing electricity and borrowing money to meet basic needs. Several respondents also reported receiving little or no assistance from government support programmes designed to mitigate the effects of the reforms.
