The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has explained how the Federal Government is spending the money saved from the removal of fuel subsidy and foreign exchange subsidies.
Speaking on Thursday at the 7th Africa Emerging Markets Forum in Abuja, Oyedele said the savings have been used to meet several government obligations, including debt servicing, payment of workers’ salaries, implementation of the new national minimum wage and funding student loans.
He also said the Federal Government would soon release a detailed breakdown showing how much was saved from the subsidy reforms and how the money has been spent.
Responding to questions about the use of the savings, Oyedele said Nigerians have every right to ask and that the government has a responsibility to be transparent.
He explained that the combined cost of fuel subsidy and what he described as “subsidy on foreign exchange” was about five per cent of Nigeria’s Gross Domestic Product (GDP).
However, he said the subsidy removal was not only aimed at saving money but also at addressing corruption and distortions in the system.
“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,” he said.
Savings Used for Debt, Salaries and Minimum Wage
Oyedele said part of the savings was used to repay the government’s Ways and Means obligations, service increasing debt costs and fund the implementation of the new national minimum wage.
He explained that before the reforms, the Federal Government relied heavily on printing money to finance its spending. After ending that practice, the government had to find other sources to meet its financial commitments.
“If you stop printing money, the spending doesn’t disappear. You need to finance the money you were printing before. That was part of where the savings went,” he said.
He also noted that higher interest rates have significantly increased Nigeria’s debt servicing costs.
According to him, borrowing rates that were previously around eight per cent have risen 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 added.
Oyedele further explained that increasing the national minimum wage from ₦30,000 to ₦70,000 almost doubled the Federal Government’s wage bill, creating additional financial responsibilities that are being partly funded with the subsidy savings.
He also said the savings have supported the Nigerian Education Loan Fund, through which more than 1.5 million students have received tuition support and monthly stipends.
According to him, the programme has reduced the financial burden on millions of families by allowing parents to use money that would have gone into school fees for businesses and other important needs.
“We will provide a detailed explanation of how much we saved and how the money has been spent,” Oyedele assured Nigerians.
Why the Government Still Borrows
Oyedele also explained why the Federal Government continues to borrow despite generating more revenue than expected.
He said exceeding a revenue target does not mean borrowing is no longer necessary if total government spending is still higher than its income.
Using an example, he said:
“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,” he said.
Oyedele maintained that borrowing is not a problem if the money is invested wisely and generates enough value for the country.
“We must add more value than the cost of every naira and every dollar that we borrow,” he said.
