The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has said that the country has saved $20bn by abolishing the petrol subsidy and adopting market-based foreign exchange pricing.
Edun said this at an event in Abuja marking the first 100 days in office of Esther Walso-Jack, Head of the Civil Service of the Federation.
President Bola Tinubu had in May last year announced the removal of fuel subsidy effective June. This led to an increase in petrol prices across states in the country.
Speaking on the development, Edun said that subsidies were costing the country about five per cent of Gross Domestic Product.
He said, “An amount of five per cent of GDP is what those two subsidies were costing. When there was a subsidy on PMS and on foreign exchange, they collectively cost five percent of GDP. Assuming GDP was $400bn on average, five percent of that is $20bn—funds that could now go into infrastructure, health, social services, and education.”
He further explained that the savings are being redirected into developmental projects.
“The real change is that no one can wake up and target cheap funding or forex from the central bank to enrich themselves without adding value. Similarly, profiteering from the inefficient petrol subsidy regime is no longer possible,” he added.
Fuel subsidies in Nigeria have been a significant and contentious issue for decades. The subsidies were introduced to make petroleum products, particularly petrol, more affordable for citizens by offsetting a portion of the cost for consumers.
However, they have often been criticized for inefficiency, corruption, and straining government finances.
While the removal freed up government funds, it led to increased costs for transportation, goods, and services, worsening inflation.
The decision was met with protests and criticism due to its immediate impact on the cost of living, particularly for low-income households.
The government had proposed initiatives like cash transfers and investments in public transportation to cushion the effects of subsidy removal.
The debate on whether the removal will lead to long-term economic benefits remains ongoing. While it allows the government to save funds previously spent on subsidies, the success of the policy hinges on how effectively the savings are reinvested to benefit the population.