The Minister of Finance and Coordinating Minister of the Economy, Mr. Taiwo Oyedele, has explained that the federal government deploys petroleum subsidy savings to servicing rising debt obligations, implementing the new national minimum wage and financing student loans.
Oyedele who offered the explanation on Thursday during a question-and-answer session at the Seventh Africa Emerging Market Forum in Abuja, added that part of the savings were channelled towards sustaining critical social intervention programmes.
The minister was responding to concerns and critics of the government as to what became of the savings realised from the reforms.
It insisted that the removal of fuel subsidy and the liberalisation of the foreign exchange market were painful but necessary decisions that have helped stabilise Nigeria’s economy after years of structural distortions.
He acknowledged that many Nigerians have repeatedly asked what happened to the funds saved from ending the subsidy regime and the multiple exchange-rate system.
“I’ve heard this question so many times, and guess what? It’s a valid question,” Oyedele said.
According to him, the combined cost of petrol subsidy and what he described as the “subsidy on foreign exchange” previously accounted for about five per cent of Nigeria’s Gross Domestic Product (GDP).
The minister added that the reforms were designed not merely to save money but to eliminate entrenched corruption, inefficiency and economic distortions.
The minister disclosed that the Federal Government would soon publish a comprehensive account of how the savings had been utilised in the interest of transparency.
“But in the meantime, I can give you some of the highlights,” he said.
Oyedele explained that before the reforms, government financed part of its expenditure through deficit financing by the Central Bank, effectively printing money to fund spending.
With that option discontinued, government had to find alternative sources to finance existing obligations.
“Before the reforms, we were printing money to spend. If you stop printing, the spending doesn’t disappear. You need to finance the money you were printing before,” he said.
He noted that debt servicing costs had also risen sharply because interest rates increased significantly following the reforms.
“Instead of paying about eight per cent on our debts, we’re paying as high as 24 per cent. When you need to service debt, you don’t debate it. You pay, and you pay on time,” he said.
Another major destination of the savings, according to the minister, was the implementation of the new national minimum wage, which raised workers’ salaries from N30,000 to N70,000 and substantially increased the Federal Government’s wage bill.
He said substantial resources had equally been committed to the Nigerian Education Loan Fund (NELFUND), through which more than 1.5 million students now receive tuition support and monthly stipends.
According to him, the programme has eased the financial burden on millions of families, allowing parents to redirect money previously spent on school fees to businesses and other household needs.
Responding to criticism that the government continues to borrow despite improved revenue collection, Oyedele explained that exceeding revenue targets does not eliminate the need for borrowing where approved expenditure remains higher than total revenue.
“If your budget is 10, your revenue target is six and you eventually collect seven, you have exceeded your revenue target, but you still need to borrow three,” he explained.
He maintained that borrowing remains appropriate where the funds are invested in projects capable of generating returns greater than the cost of the loans.
The minister also rejected claims that the reforms had failed because poverty initially worsened, describing the temporary hardship as an inevitable consequence of correcting years of fiscal distortions.
According to him, removing subsidies could not instantly make citizens wealthier because the reforms represented a necessary economic reset after years of what he described as “fiscal illusions.”
Despite the initial pains, he said Nigeria recorded nearly 10 per cent real per capita income growth in dollar terms in 2025 and expressed confidence that poverty levels would decline as the reforms mature.
He said government would no longer rely solely on GDP growth to measure economic success.
Instead, he said, performance would be assessed using reductions in multidimensional poverty, improvements in real income per person and declining income inequality.
“We intend to make it prosperity for all Nigerians,” he said.
Oyedele also disclosed that the Federal Government is developing a framework to reduce borrowing costs for businesses without introducing fresh subsidies.
(Ripples)
