Fuel subsidy: FG records N20.4tn extra resources, spends N30.6tn, says Oyedele

Fuel subsidy: FG records N20.4tn extra resources, spends N30.6tn, says Oyedele

The Federal Government generated about N20.4tn in additional resources from fuel subsidy removal and other fiscal reforms over the last three years, but spent N30.64tn on wages, debt servicing, infrastructure and electricity subsidies, the Minister of Finance, Taiwo Oyedele, has disclosed.

Oyedele gave the figures on Wednesday at a press conference, where he explained how the government had deployed the resources generated from the reforms introduced by President Bola Tinubu’s administration.

According to him, the removal of fuel subsidy resulted in N15.8tn in savings that accrued to the Federation Account and were shared among the three tiers of government.

He said the Federal Government received N5.43tn, states got N6.52tn, while local governments received N3.88tn from the subsidy savings.

The minister explained that the reforms also generated N3.12tn in incremental revenues, while the Federal Government raised an additional N11.85tn through borrowing.

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These, he said, brought the Federal Government’s total incremental resources during the period to approximately N20.4tn.

Oyedele, however, stressed that the subsidy removal did not translate into N20.4tn of cash available solely to the Federal Government, noting that a significant portion of the resources was shared among the different tiers of government.

“The Federal Government had approximately N20.4tn in incremental resources.

“Over the same period, additional expenditures amounted to approximately N30.64tn. Subsidy removal therefore did not create one large pool of cash available to the Federal Government. It reduced a major fiscal burden and the amount of additional borrowing that would otherwise have been required,” he said.

Giving a breakdown of the additional expenditure, Oyedele said N9.39tn was spent on wage adjustments, while N9.37tn went into servicing external debt.

He added that N6.47tn was committed to infrastructure, while N3.14tn was spent on electricity subsidies.

The figures offer a clearer picture of the fiscal impact of the Tinubu administration’s decision to remove fuel subsidy, a policy announced in May 2023 shortly after the President assumed office.

The subsidy removal triggered a sharp increase in petrol prices, while the government’s subsequent liberalisation of the foreign exchange market also led to significant fluctuations in the value of the naira.

Oyedele’s explanation suggests that the savings from subsidy removal were used largely to ease fiscal pressures, support increased government spending and reduce the need for even higher borrowing, rather than providing the Federal Government with a single pool of funds for discretionary spending.

 

Fuel subsidy: FG records N20.4tn extra resources, spends N30.6tn, says Oyedele