The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has explained how the Federal Government is deploying savings from the removal of fuel and foreign exchange (FX) subsidies, saying the funds have been used to service debts, implement the new minimum wage, finance student loans and meet other critical fiscal obligations.
Oyedele made the disclosure on Thursday at the 7th Africa Emerging Markets Forum in Abuja, where he also pledged to publish a detailed breakdown of the subsidy savings and how they have been utilised.
Responding to questions over the use of the funds, he described public concerns as legitimate, stressing that the government owed Nigerians a transparent account of its spending.
According to him, the combined cost of fuel subsidies and what he described as the “subsidy on foreign exchange” amounted to about five per cent of Nigeria’s Gross Domestic Product (GDP).
He, however, emphasised that the reforms were introduced primarily to eliminate economic distortions and corruption rather than simply generate fiscal savings.
“But the money saved is also important. In a few days, you will see the detailed analysis because we believe we owe Nigerians an explanation of what we do. That’s what transparency looks like,” he said.
Oyedele disclosed that a significant portion of the savings had been used to offset the Federal Government’s Ways and Means obligations, meet rising debt servicing costs and fund the implementation of the new national minimum wage.
He explained that before the reforms, the government relied heavily on financing expenditure through money creation, while interest rates were about eight per cent and the national minimum wage stood at N30,000.
“If you stop printing money, the spending doesn’t disappear. You still need to finance what you were previously funding through money creation. That was part of where the savings went,” he said.
He added that rising interest rates had substantially increased the government’s debt servicing costs, with borrowing rates climbing to as much as 24 per cent.
“Instead of paying eight per cent on our debt, we’re now paying as high as 24 per cent. Debt obligations must be honoured, and they must be paid on time,” he said.
The fiscal policy expert also noted that the increase in the national minimum wage from N30,000 to N70,000 had significantly raised the Federal Government’s wage bill.
He further disclosed that part of the savings had been channelled into the Nigerian Education Loan Fund (NELFUND), through which more than 1.5 million students have received tuition support and monthly stipends.
According to him, the programme has eased the financial burden on millions of families, allowing parents to redirect resources to businesses and other essential household needs.
“We will provide a detailed explanation of how much we saved and how the money has been spent,” he assured.
Why Government Still Borrows
Oyedele also addressed concerns over the Federal Government’s continued borrowing despite recording stronger-than-expected revenue performance.
He explained that exceeding revenue targets does not eliminate the need for borrowing when planned expenditure remains higher than total revenue.
“If you have a budget of 10 and your revenue target is six, you need to borrow four. If you eventually collect seven, you’ve exceeded your revenue target, but you still need to borrow three,” he said.
According to him, borrowing remains appropriate as long as the funds are invested in projects that generate returns exceeding their cost.
“We must create more value than the cost of every naira and every dollar we borrow,” Oyedele added.
