Explainer: Where N15.8tn subsidy savings went

n n

The Federal Government has explained how resources generated from the removal of petrol subsidy and foreign exchange reforms were distributed and spent between June 2023 and December 2025.

n

According to the Federal Ministry of Finance’s Nigeria Reform Scorecard presented on Wednesday, the reforms generated N15.8tn in subsidy savings for the Federation during the period.

n

However, the entire N15.8tn did not accrue to the Federal Government.

n

How was the N15.8tn shared?

n

The ministry’s presentation showed that the N15.8tn was distributed among the three tiers of government through the statutory allocation system.

n

The Federal Government received N5.4tn, representing 34 per cent of the amount.

n

States received N6.5tn, or 41 per cent, while local governments received N3.9tn, representing 24 per cent.

n

This means the Federal Government’s share of the N15.8tn was N5.4tn, while N10.4tn went to states and local governments.

n

Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele, explained that the subsidy savings did not appear in the Federation Account as a separate item labelled “subsidy savings.”n

n

“Between June 2023 and December 2025, subsidy savings mobilised a sum of N15.8tn in resources for the Federation,” Oyedele said.

n

He explained that the effect of the reforms was reflected through increased revenue collections.

n

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

n

What happened to the Federal Government’s N5.4tn?

n

The ministry’s presentation showed that the N5.4tn subsidy savings was only part of the additional resources available to the Federal Government.

n

It recorded N3.1tn in other incremental revenue, mainly from remittances by government-owned entities.

n

The government also recorded N11.9tn in incremental borrowing.

n

Together, the N5.4tn subsidy savings, N3.1tn additional revenue and N11.9tn borrowing brought the Federal Government’s total incremental resources to N20.4tn.

n

Borrowing accounted for the largest share, at N11.9tn or 58 per cent. Subsidy savings accounted for N5.4tn, or 27 per cent, while other revenue contributed N3.1tn, or 15 per cent.

n

How was the money spent?

n

The ministry said total incremental expenses during the period amounted to N30.64tn.

n

The largest expenditure was wage adjustments, which accounted for N9.39tn. This covered the minimum wage, wage awards and allowances.

n

The second-largest category was external debt service, which amounted to N9.37tn, with the ministry attributing the increase to the impact of exchange rate depreciation.

n

Another N6.47tn went into strategic infrastructure development.

n

The government also spent N3.14tn on the incremental cost of electricity subsidy, while N1.24tn went into domestic debt service linked to the impact of monetary policy rate increases.

n

Other expenditures included N423.8bn for social welfare transfers, N419.1bn for FCT development, the Ecological Fund and natural resource investments, and N201.26bn in higher naira costs of foreign obligations.

n

Where did the remaining money come from?

n

The ministry’s figures show that the N30.64tn total incremental expenses were not funded entirely from the N20.4tn in incremental resources.

n

Of the spending, N20.404tn was funded from incremental resources, while N10.236tn came from the existing revenue base.

n

In other words, the N5.4tn Federal Government share of the subsidy savings was part of a wider pool of N20.4tn in incremental resources used to fund various government expenditures.

n

What does the government say the reforms achieved?

n

The ministry also presented a comparison between Nigeria’s current economic position and what it estimated could have happened without the reforms.

n

It said debt service-to-revenue had fallen from about 100 per cent in 2022 to a projected 50 per cent in 2026, while the number of states unable to pay salaries had fallen from 27 in 2023 to zero in 2026.

n

The ministry also reported higher foreign exchange reserves, improved capital importation, stronger GDP growth and increased oil production.

n

However, it acknowledged that household welfare remains a work in progress, with poverty still high and the cost of living having risen significantly following the reforms.

n

The government said its next priorities include reducing inflation, maintaining a unified exchange rate, lowering poverty, improving food security and ensuring that the macroeconomic gains translate into better living conditions for Nigerians.

n n