The Minister of Finance and Coordinating Minister of the Economy and Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has explained how President Tinubu’s administration has been utilising the money saved from fuel subsidy removal and foreign exchange subsidies.
Oyedele said the savings had been used to meet several government obligations, including debt servicing, payment of salaries, implementation of the new national minimum wage and student loans.
He disclosed this on Thursday at the ongoing 7th Africa Emerging Markets Forum in Abuja.
The fiscal policy expert also promised that the Federal Government would soon release a detailed breakdown showing how much was saved from the subsidy reforms and how the funds had been spent.
Responding to concerns over the use of the money saved from the subsidy removal, Oyedele said the question was legitimate and that the government had a responsibility to explain its actions to Nigerians.
He said the combined cost of fuel subsidy and what he described as “subsidy on foreign exchange” was equivalent to about five per cent of Nigeria’s Gross Domestic Product (GDP).
However, he explained that the main reason for removing the subsidies was not only to save money but also to address distortions and corruption 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 To Service Debts
Oyedele said part of the savings had been used to offset the government’s Ways and Means obligations, service rising debt costs and fund the implementation of the new national minimum wage.
He explained that before the reforms, the Federal Government depended heavily on money creation to finance its spending.
According to him, the government had to find alternative ways of funding its obligations after the practice was stopped.
“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.
Oyedele added that the increase in interest rates had also significantly raised the cost of servicing the country’s debts.
He said borrowing rates, which were previously around eight per cent, had 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.
The committee chairman also said the increase in the national minimum wage from ₦30,000 to ₦70,000 had almost doubled the Federal Government’s wage bill.
He explained that the increase in workers’ salaries had created additional financial responsibilities for the government, with part of the funds saved from the reforms being used to meet the obligations.
The Federal Government approved the ₦70,000 national minimum wage following negotiations with labour unions and other stakeholders.
Oyedele further disclosed that the savings had helped support the Nigerian Education Loan Fund, through which more than 1.5 million students had received tuition support and monthly stipends.
He said the programme had helped reduce the financial pressure on millions of Nigerian families.
He explained that the increase in workers’ salaries had created additional financial responsibilities for the government, with part of the funds saved from the reforms being used to meet the obligations.
The Federal Government approved the ₦70,000 national minimum wage following negotiations with labour unions and other stakeholders.
Oyedele further disclosed that the savings had helped support the Nigerian Education Loan Fund, through which more than 1.5 million students had received tuition support and monthly stipends.
He said the programme had helped reduce the financial pressure on millions of Nigerian families.
According to him, the student loan initiative has allowed parents to redirect some of the money they would have spent on their children’s education to 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.
Oyedele Reveals Why Tinubu’s Government Still Borrows Despite Exceeding Target Revenue
The minister also explained why the Federal Government continues to borrow money despite recording higher-than-expected revenue.
Oyedele noted that surpassing a revenue target did not automatically mean that the government would no longer need to borrow, particularly when its total budgeted expenditure was still higher than its income.
He illustrated the situation with an example.
“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.
According to him, the government would continue to borrow when there was a gap between its revenue and expenditure, but the borrowed funds must be used in a way that would benefit the country.
Oyedele maintained that borrowing was not necessarily bad if the money was invested productively and generated enough value to justify its cost.
“We must add more value than the cost of every naira and every dollar that we borrow,” he said.