This study investigates the structural macroeconomic consequences and causal policy implications of complete downstream petroleum sector deregulation in Nigeria, focusing specifically on the May 2023 fuel subsidy elimination. Rooted in Dependency and Social Contract theories, the research employs a rigorous tripartite econometric framework comprising a Non-Linear Autoregressive Distributed Lag (NARDL) model, a Time-Varying Parameter Structural Vector Autoregressions (TVP-SVAR) model, and a SCM counterfactual analysis using data spanning from 1986 through 2026. Zivot-Andrews and Gregory-Hansen tests endogenously confirm 1986 and 2023 as profound structural break dates within Nigeria’s co-integration vector. The NARDL estimates reveal a stark long-run asymmetric price transmission mechanism, where positive fuel price shocks significantly accelerate headline inflation, whereas negative shocks exhibit severe downward price stickiness due to retail market frictions and transport inefficiencies. Simultaneously, currency devaluations rapidly pass through into domestic consumer prices, creating a self-reinforcing stagflationary loop with fuel import costs. Dynamically, the TVP-SVAR impulse responses demonstrate a sharp historical escalation in shock sensitivity, with the instantaneous pass-through coefficient surging from 0.154 in the 1986 SAP era to an unprecedented 0.584 in the post-2023 deregulated climate, confirming that the erosion of domestic refining infrastructure has structurally amplified the economy’s vulnerability to cost-push energy shocks. To isolate clean policy causality, the SCM procedure constructs an uncorrupted counterfactual policy unshocked Nigeria from an optimized untreated comparison pool of 20 developing nations. The estimates reveal that by late 2024, the fuel subsidy removal exerted a statistically significant net causal treatment effect ( ) of +15.50 percentage points on headline inflation and a devastating +17.90 percentage points on the food poverty index. Placebo permutation checks validate that these structural gaps persist into 2026, marking a permanent contraction of household purchasing power rather than a transitory market adjustment. These findings indicate that conventional demand-side monetary tightening, such as interest rate hikes, is fundamentally ill-suited to combat an inflation profile driven by structural supply-side distortions. The study concludes that successful fiscal consolidation requires a phased approach, the restoration of domestic refining capacity, and institutionalized, pre-established transport and social safety nets to protect public welfare and preserve the domestic social contract.