The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has said savings from fuel and foreign exchange subsidy reforms have largely been channelled into debt servicing, increased workers’ wages, student loans and other government obligations.
Oyedele made the disclosure on Wednesday in Abuja at the 7th African Emerging Markets Forum organised by the Central Bank of Nigeria (CBN), where he acknowledged public concerns over how the savings from the reforms had been utilised.
The minister said the combined cost of fuel and foreign exchange subsidies was equivalent to about five per cent of Nigeria’s Gross Domestic Product (GDP), but stressed that the primary objective of removing the subsidies was not simply to accumulate savings.
According to him, the reforms were aimed at eliminating economic distortions and corruption associated with the subsidy regimes.
“Saving money was not the primary objective. It was eliminating the distortion and the corruption in the system, which is more fundamental,” Oyedele said.
He assured Nigerians that the government would soon publish a detailed analysis showing the savings realised from the reforms and how the resources had been allocated.
Oyedele explained that although the reforms generated fiscal savings, the government immediately faced increased financial pressures, including higher debt servicing costs and the implementation of the new national minimum wage.
He said Nigeria had previously relied on money printing to finance government expenditure, a practice that fuelled inflation but reduced the need for immediate borrowing.
“Stopping money printing did not mean the spending disappeared. You still needed to finance the money that was previously being printed,” he said, adding that part of the subsidy savings was used to service existing debts.
The minister noted that rising inflation after the reforms contributed to higher interest rates, increasing the government’s debt repayment obligations.
He said debt servicing costs rose significantly, with interest rates increasing from about eight per cent to as high as 24 per cent in some cases.
“When you need to service debts, you do not debate whether you need to pay. You cannot negotiate it. You pay, and you pay on time,” he said.
Oyedele also highlighted the government’s spending on the new minimum wage and education financing through the Nigerian Education Loan Fund (NELFUND).
He said the minimum wage was increased from N30,000 to N70,000, resulting in a substantial rise in the government’s wage bill, while more than 1.5 million students were receiving financial support for tuition and monthly stipends through NELFUND.
According to him, the education loans had reduced the financial burden on many families, allowing parents to redirect resources previously reserved for school fees towards businesses and other household needs.
The minister reiterated that the fuel subsidy removal and foreign exchange market reforms were designed to correct longstanding economic imbalances, improve productivity and attract investment.
He said President Bola Tinubu’s administration chose to implement difficult reforms that previous governments had delayed because postponing them would have created greater economic challenges.
Oyedele said the government inherited an economy affected by structural distortions that weakened investment, productivity and competitiveness.
He maintained that Nigeria’s target of becoming a $1 trillion economy by 2030 remained achievable, describing it as the result of sustained reforms rather than a political slogan.
The minister said the government was focused on moving from economic stabilisation to investment, productivity growth and improved living standards.
He cited rising foreign reserves, lower inflation from its 2024 peak, increased capital inflows, banking sector recapitalisation and Nigeria’s removal from the Financial Action Task Force (FATF) grey list as signs of improving investor confidence.
“Capital has no passports, no tribe, no patriotic loyalty. It responds to evidence, not rhetoric,” Oyedele said, pointing to increased foreign portfolio and direct investment flows as evidence of progress.
However, he acknowledged that improved economic indicators alone would not be sufficient unless ordinary Nigerians experienced better living conditions.
The minister said the government’s priority was to convert stability into investment, investment into productivity, and productivity into decent jobs and improved incomes for households.
“Stability is not the finish line. A stable economy can still be a stagnant one if growth is weak,” he said, adding that economic transformation required moving through the stages of stabilisation, growth and shared prosperity.
