The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has explained how the Federal Government is utilising savings from the removal of fuel and foreign exchange subsidies.
He stated that the funds have been channelled into debt servicing, implementation of the new national minimum wage, student loans and other priority commitments.
Oyedele disclosed this on Thursday while speaking at the 7th Africa Emerging Markets Forum in Abuja, where he also promised that a detailed breakdown of the subsidy savings and how they have been spent would soon be made public.
Responding to concerns over the use of the savings, he said Nigerians were right to demand accountability, adding that the government had a responsibility to explain how the funds had been utilised.
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According to him, the combined cost of fuel subsidy and what he described as the “subsidy on foreign exchange” amounted to about five per cent of Nigeria’s Gross Domestic Product (GDP).
He noted that although the reforms created fiscal savings, their broader objective was to eliminate distortions and curb corruption associated with the previous 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.
Oyedele said part of the savings had been used to clear the Federal Government’s Ways and Means obligations, service increasing debt commitments and fund the implementation of the new national minimum wage.
He explained that before the reforms, government spending was largely supported through money creation, making it necessary to find alternative sources of funding after the subsidy removal.
“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 added that higher interest rates had significantly increased the cost of servicing the country’s debt.
“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 also said the increase in the national minimum wage from N30,000 to N70,000 had almost doubled the Federal Government’s wage bill.
He further disclosed that the savings had supported the Nigerian Education Loan Fund (NELFUND), through which more than 1.5 million students have received tuition support and monthly upkeep allowances.
According to him, the programme has eased financial pressure on many families, allowing parents to redirect resources to other essential needs.
Speaking on concerns over the Federal Government’s continued borrowing despite surpassing its revenue targets, Oyedele explained that higher revenue does not automatically eliminate the need for borrowing when projected expenditure still exceeds available income.
“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.
He maintained that borrowing should be judged by how effectively the funds are utilised.
“We must add more value than the cost of every naira and every dollar that we borrow,” he said.