At the 7th Africa Emerging Markets Forum in Abuja, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, provided a detailed explanation of how the Federal Government has allocated savings from the removal of fuel and foreign exchange subsidies. He stated that the funds have been directed toward servicing the national debt, financing salary increases for public workers, supporting student loans through the Nigerian Education Loan Fund (NELFUND), and clearing the government's Ways and Means obligations. Oyedele assured Nigerians that a comprehensive breakdown of the savings and expenditures would be published in the coming days, emphasizing the government's commitment to transparency.
Subsidy Removal Savings Represented 5% of GDP
Oyedele noted that the combined cost of fuel subsidy and what he termed the “subsidy on foreign exchange” previously accounted for approximately five per cent of Nigeria’s Gross Domestic Product (GDP). Addressing concerns from the public and experts, he described questions about the utilization of the savings as legitimate. “But the money saving is also important. In a few days, you will see the detailed analysis because we believe that we owe a duty to explain what we do to the Nigerian people. That's what transparency looks like,” Oyedele stated.
Debt Servicing Costs Soared with Higher Interest Rates
A significant portion of the subsidy savings has been channeled into servicing the national debt. Oyedele explained that Nigeria’s borrowing costs have risen sharply, with interest rates climbing from around eight per cent to as high as 24 per cent. “Instead of paying eight per cent on our debt, we're paying as high as 24 per cent. When you need to service debts, you don't debate whether you need to pay. You pay, and you pay on time,” he said. Additionally, the government used part of the savings to clear its Ways and Means advances from the Central Bank of Nigeria, reducing the money supply and curbing inflation. He clarified that stopping the printing of money did not eliminate the spending obligations; the same funds had to be sourced from the subsidy savings.
Minimum Wage Doubled, Student Loan Program Expanded
Another major allocation was the increase in the national minimum wage from N30,000 to N70,000, which nearly doubled the Federal Government’s wage bill. Oyedele confirmed that the savings enabled the government to implement this salary hike without resorting to additional borrowing. Furthermore, the Nigerian Education Loan Fund (NELFUND) has received support, allowing more than 1.5 million students to access tuition assistance and monthly stipends. He emphasized that this program eases the financial burden on households, enabling families to redirect resources toward businesses and other essential needs.
Borrowing Still Necessary Despite Revenue Surplus
Addressing continued government borrowing even after exceeding revenue targets, Oyedele explained that higher revenue does not automatically eliminate the need for borrowing if planned expenditure still outpaces income. He illustrated: “If you have a budget to spend 10 and your revenue target is six, you need to borrow four. If you eventually collect seven, you have exceeded your revenue target, but you still need to borrow three.” Oyedele maintained that borrowing is not inherently problematic provided the funds are invested productively. “We must add more value than the cost of every naira and every dollar that we borrow,” he concluded.
