While the concept of subsidy is noble, its administration has been plagued with serious issue of corruption and mismanagement thereby causing a huge gap of budget deficit in Nigeria. Successive governments have contemplated the idea of removing subsidy albeit with no effect until May, 2023. This paper examines the contending issues of subsidy removal and discussed the challenges it has incurred while also providing recommendations for the way forward. Relying on secondary data and sustainable development theory, the paper discussed the contending issues that characterized the fuel subsidy regime which are: the Unsustainable subsidy costs, huge distortion of the economy, illegal trade of petroleum products, pervasive corruption and investment related issues. Since the subsidy was removed, it has created nationwide challenges which the paper itemized as purchasing power reduction due to a high inflation rate, dwindling economic activities, prevalence of social unrests in the country and astronomic rise in the prices of petroleum products. The paper therefore concluded that the study therefore concluded that the decision to remove subsidy is quite important. However, much has not been done to mitigate the negative impact on the citizens. The paper recommended that government should implement a sincere, well managed, well-coordinated and corruption free palliative measures to cushion the effect of the subsidy removal. Also, there should be an increase in the minimum wage of workers, fixing local refineries should be a top priority and lastly, the challenge of electricity should be given ultimate attention.