Key facts
- Savings from Nigeria's fuel subsidy and foreign-exchange reforms have been largely absorbed by higher debt servicing costs and increased government spending.
- The reforms, implemented by President Bola Tinubu, aimed to win investor backing but have driven up living costs.
- Fuel subsidies and implicit foreign-exchange subsidies previously cost Nigeria approximately 5% of GDP.
- Borrowing rates have increased significantly, reaching up to 24% from around 8% before the reforms.
- The government's wage bill has nearly doubled following an increase in the minimum wage to 70,000 naira per month.
- Increased spending has been directed towards an education loan program supporting over 1.5 million students.
Nigeria's Finance Minister Taiwo Oyedele stated that savings generated from the removal of fuel subsidies and foreign-exchange market reforms have been largely absorbed by increased debt servicing costs and higher government spending. Speaking at the African Emerging Markets Forum in Abuja, Oyedele defended the reforms initiated by President Bola Tinubu, which have been criticized for worsening living conditions despite gaining investor and international lender backing.
Oyedele explained that fuel subsidies and an implicit foreign-exchange subsidy previously cost Nigeria approximately 5% of its GDP. He noted that borrowing rates have surged to as much as 24% from around 8% prior to the reforms. Additionally, the government's wage bill has nearly doubled following an increase in the minimum wage to 70,000 naira ($51) per month. The government has also allocated increased spending to an education loan program that provides tuition support and monthly stipends to over 1.5 million students.
The minister rejected a recent IMF assessment suggesting that millions of Nigerians remain in poverty despite the reforms, arguing that a temporary decline in real incomes is an inevitable consequence of subsidy removal. He indicated that the government would track progress using multidimensional poverty, real per-capita income growth, and income inequality metrics, rather than solely relying on headline GDP growth.