The Federal Government has used subsidy savings to service debts, fund salary increases, support student loans and meet other pressing financial obligations, Taiwo Oyedele has said.
According to Vanguard, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms spoke on Thursday at the seventh Africa Emerging Markets Forum in Abuja.
Oyedele acknowledged growing public concern over how the government has used funds saved from removing fuel and foreign exchange subsidies. He described the demand for accountability as legitimate and promised that a detailed breakdown would be released within days.
He estimated that the combined cost of both subsidies amounted to about five per cent of Nigeria’s Gross Domestic Product before the reforms.
However, Oyedele said the government did not remove the subsidies solely to save money. He explained that the reforms also sought to eliminate corruption, market distortions and inefficient spending.
“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,” he said.
“That’s what transparency looks like.”
Subsidy savings support debt payments
Oyedele said part of the subsidy savings went into settling the government’s Ways and Means obligations and servicing rising debt costs.
Ways and Means refers to advances provided by the Central Bank of Nigeria to cover government funding gaps. Previous administrations relied heavily on the arrangement when revenues could not meet expenditure.
Oyedele explained that stopping money creation did not automatically remove the expenses previously financed through it. The government still needed to find legitimate revenue to meet those obligations.
“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 rising interest rates had substantially increased the cost of servicing Nigeria’s debt.
Before the reforms, the government could borrow at rates of about eight per cent. However, some borrowing costs have since climbed 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,” Oyedele said.
“When you need to service debts, you don’t debate whether you need to pay. You pay, and you pay on time.”
Minimum wage increases government spending
Oyedele also linked part of the expenditure to the implementation of the new national minimum wage.
The Federal Government increased the minimum wage from N30,000 to N70,000, raising its salary obligations to workers.
He said the adjustment had almost doubled the government’s wage bill, making it necessary to commit more funds to personnel costs.
Although the wage increase improved the earnings of public workers, it also created a significant financial responsibility for the government.
Oyedele maintained that the additional spending helped explain why the savings did not simply remain in government accounts.
Student loan scheme receives funding
The fiscal policy expert said the government also channelled some of the funds into the Nigerian Education Loan Fund.
According to him, more than 1.5 million students have received tuition assistance and monthly upkeep payments through the programme.
Oyedele said the scheme had reduced the pressure on families struggling to pay school fees and other education expenses.
The support also allowed some parents to redirect their limited resources towards businesses, food, healthcare and other household needs.
He promised that the government would publish figures showing the amount saved and how different programmes received funding.
“We will provide a detailed explanation of how much we saved and how the money has been spent,” he said.
Why government continues to borrow
Oyedele also addressed questions about why the Federal Government still borrows after reporting that it exceeded its revenue targets.
He explained that surpassing a revenue projection does not necessarily mean the government has enough money to fund its entire budget.
Using a simple illustration, he said a government planning to spend 10 units with expected revenue of six units would need to borrow four.
Even if it eventually earned seven units and surpassed its target, it would still need to borrow the remaining three to fund the budget.
“If you have a budget to spend 10 and your revenue target is six, you need to borrow four,” Oyedele said.
“If you eventually collect seven, you have exceeded your revenue target, but you still need to borrow three.”
He argued that borrowing should not automatically attract criticism, provided the government invests the money in activities that generate greater economic value.
Oyedele said every naira or dollar borrowed should support projects capable of producing benefits above the cost of the debt.
“We must add more value than the cost of every naira and every dollar that we borrow,” he said.
The promised expenditure report is expected to provide more clarity about the subsidy savings and the programmes that have received funding since the reforms began.
