Subsidy savings absorbed by debt costs, wage bills, says finance minister

Nigeria's finance minister has admitted that savings from the removal of fuel subsidies and foreign-exchange reforms have been largely eaten up by higher debt-servicing costs and increased government spending. Taiwo Oyedele spoke on Thursday at the African Emerging Markets Forum in Abuja, as officials defend reforms that have worsened living conditions for millions.

President Bola Tinubu's 2023 reforms won applause from investors and international lenders. But they drove up the cost of living for ordinary Nigerians, and there has been growing pressure on the government to show where the new savings went.

Where the savings went

Oyedele said fuel subsidies and what he called an implicit foreign-exchange subsidy had cost Nigeria roughly 5% of GDP before their removal. He said part of the savings had been absorbed by higher debt-servicing costs, with borrowing rates jumping to as much as 24% from around 8% before the reforms.

The minister also said the government's wage bill nearly doubled after the minimum wage was more than doubled to 70,000 naira ($51) a month. In addition, spending has increased on an education loan programme that provides tuition support and monthly stipends to more than 1.5 million students.

Minister rejects IMF poverty assessment

Oyedele pushed back against a recent IMF assessment that millions of Nigerians remained in poverty despite reforms welcomed by investors. He argued that a temporary decline in real incomes was inevitable after subsidy removal.

He said the government would track progress through multidimensional poverty, real per-capita income growth, and income inequality, rather than relying on headline GDP growth alone.

For Nigerians, the minister's comments confirm that subsidy savings are not showing up as immediate relief in their pockets. With debt costs and wage bills consuming the gains, consumers continue to face the squeeze of higher prices and weaker purchasing power.