Subsidy removal, FX reforms yielded N15.8tn in 30 months – FG

Nigeria's Federal Government has reported that the removal of petrol subsidies and the unification of the foreign exchange market have generated approximately N15.8tn in additional resources for the Federation. This fiscal boost is projected to have occurred between June 2023 and December 2025, with states and local governments set to receive the larger portion of these funds.

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Between June 2023 and December 2025, subsidy savings mobilized a sum of N15.8tn in resources for the Federation.

Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, disclosed this at a media conference detailing Nigeria's reform scorecard. He explained that the savings from the subsidy removal are not itemized as a distinct entry in the Federation Account. Instead, the reforms have led to increased revenue collections, primarily driven by the changes in the exchange rate and the elimination of distortions caused by the subsidy regime.

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Many people will say, ‘Where is the subsidy saving?’ As a matter of fact, there wasn’t any line in the Federation Account with the description, ‘subsidy savings.’

"Between June 2023 and December 2025, subsidy savings mobilized a sum of N15.8tn in resources for the Federation," Oyedele stated. He addressed the common question about the whereabouts of the subsidy savings, clarifying, "As a matter of fact, there wasn’t any line in the Federation Account with the description, ‘subsidy savings.’"

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So, the subsidy savings showed up in the Federation accounts by way of higher revenue collections as a result of the reforms.

Oyedele elaborated that the savings manifested through higher collections by customs and other revenue agencies. For instance, the naira value of import duties increased significantly as the exchange rate moved from approximately N460 to over N1,000 per dollar. Similarly, revenues like the Petroleum Profit Tax saw a higher naira equivalent due to the exchange rate adjustments. The minister emphasized that these additional fiscal resources were not solely from the petrol subsidy removal but also from the foreign exchange reforms, which he argued ended an implicit subsidy that had fostered rent-seeking behavior. "And that subsidy was not going to the ordinary person or manufacturers. It was going to rent-seekers," he added.

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Not just the subsidy removal, but also the exchange rate flotation, because we were subsidising the exchange rate. And that subsidy was not going to the ordinary person or manufacturers. It was going to rent-seekers.