FINANCE MINISTER SAYS SUBSIDY SAVINGS ABSORBED BY DEBT SERVICING, WAGES AND SOCIAL PROGRAMS
Nigeria's Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, stated on Thursday, July 31, 2026, that fiscal savings from the removal of fuel subsidies and foreign exchange market reforms have been largely absorbed by increased debt servicing costs, higher wage bills, and expanded social spending programs.
The Minister made the statement during the African Emerging Markets Forum held in Abuja.
STATEMENT FROM THE MINISTER
Oyedele said that prior to 2023, the Federal Government spent approximately 5% of Gross Domestic Product annually on fuel subsidies and implicit foreign exchange subsidies.
Following the policy reforms announced by President Bola Tinubu in May 2023, the government projected that the removal of these subsidies would free up fiscal resources for infrastructure, health, education, and other developmental priorities.
However, according to Oyedele, the savings have been redirected to three primary areas:
Debt Servicing: Increased interest rates have raised the cost of servicing both domestic and external debt.
Wage Bill: The implementation of a new national minimum wage increased government personnel costs.
Social Investment: New and expanded social programs including student loans.
BREAKDOWN OF EXPENDITURE
DEBT SERVICING
The Minister stated that interest rates on government borrowing increased significantly between 2023 and 2026.
Prior to the reforms, average interest rates were approximately 8%. As of 2026, rates have risen to as high as 24%.
This increase has raised the amount required to service Nigeria's public debt. The Debt Management Office reported that Nigeria's total public debt stood at ₦121.67 trillion as of March 31, 2026.
Debt servicing accounted for 41% of the Federal Government's 2025 budget.
WAGE BILL
In 2024, the Federal Government approved a new national minimum wage of ₦70,000 per month, up from ₦30,000 per month.
Oyedele stated that the wage adjustment led to the government’s wage bill nearly doubling. The increase applies to federal civil servants and has implications for subnational governments.
SOCIAL PROGRAMS
The administration launched the Nigerian Education Loan Fund in 2024. The program provides tuition support and monthly stipends to eligible students in tertiary institutions.
As of July 2026, over 1.5 million students have benefited from the program. Funds are disbursed directly to institutions for tuition and to students for upkeep.
GOVERNMENT POSITION ON REFORMS
Oyedele defended the economic reforms, stating that they were necessary to correct fiscal imbalances and ensure long-term sustainability.
He acknowledged that the reforms have resulted in a decline in real incomes for many households but described the impact as "temporary" and "inevitable."
The Minister rejected a recent assessment by the International Monetary Fund which stated that millions of Nigerians remain in poverty despite the reforms.
Oyedele said the government is adopting new metrics to measure economic progress. These include multidimensional poverty, real per-capita income growth, and income inequality, in addition to Gross Domestic Product growth.
He stated that the reforms are part of the Federal Government's "Renewed Hope Agenda."
ECONOMIC INDICATORS POST-REFORM
Since the removal of fuel subsidy in May 2023:
Petrol Price: Increased from ₦185 per litre to over ₦900 per litre in August 2026.
Inflation: Peaked in 2024 and has shown gradual moderation in 2025 and 2026, according to National Bureau of Statistics data.
Foreign Exchange: The naira was floated, leading to convergence of official and parallel market rates.
Foreign Investment: The Central Bank of Nigeria reported increased foreign investor confidence with higher inflows recorded in 2024 and 2025.
POLITICAL REACTION
Former Vice President Atiku Abubakar, on August 3, 2026, released a statement rejecting the administration's economic scorecard. He referenced outstanding wage obligations and the impact of reforms on household welfare.
The Peoples Democratic Party also issued a statement criticizing the rising cost of living and calling for policy adjustments.
Labor unions have indicated that they are monitoring the impact of the minimum wage increase relative to inflation and may engage the government in further negotiations.
FISCAL OUTLOOK
The Ministry of Finance stated that the 2027 budget will prioritize capital expenditure in infrastructure, health, and education, subject to revenue performance and debt obligations.
The government continues to implement measures to increase non-oil revenue, including tax administration reforms and digitalization of revenue collection.
Oyedele stated that the administration remains committed to reducing the debt-to-GDP ratio over the medium term.
The Federal Government stated that it will continue to monitor economic indicators and the impact of reforms on households and businesses.
The Ministry of Finance indicated that communication with the public on budget performance and expenditure will be increased.
The government also stated that it is working with state governments to ensure effective implementation of programs funded from increased allocations post-subsidy removal.