FG: N15.8 Trillion Boost from Fuel Subsidy End, Forex Overhaul

The Nigerian Federal Government announced on Wednesday that a substantial N15.8 trillion in additional revenue has been generated for the Federation. This financial boost, projected to span from June 2023 to December 2025, is primarily attributed to the discontinuation of petrol subsidies and the unification of the foreign exchange market. Notably, state and local governments are set to receive the larger portion of these funds.

Despite the significant figures, the government clarified that these 'subsidy savings' do not appear as a distinct item within the Federation Account. Instead, the gains from these economic reforms are reflected in higher overall revenue collections. This increase, according to officials, is a direct consequence of shifts in the exchange rate and the elimination of market distortions previously caused by subsidies.

Taiwo Oyedele, the Minister of Finance and Coordinating Minister of the Economy, shared this information during a press briefing titled "The Benefits, Costs and Harm Prevented," which focused on Nigeria’s reform progress. This explanation comes as the government addresses persistent public inquiries about the whereabouts of savings following President Bola Tinubu's declaration of petrol subsidy removal in May 2023.

Oyedele further elaborated that the N15.8 trillion was not deposited into the Federation Account under a specific label like "subsidy savings." He explained that the combined impact of ending petrol subsidies and implementing foreign exchange reforms effectively inflated the naira valuation of earnings flowing into the Federation.

"Between June 2023 and December 2025, subsidy savings mobilised a sum of N15.8tn in resources for the Federation," Oyedele stated, directly quoting his earlier remarks. He acknowledged the common question about the whereabouts of these savings. “Many people will say, ‘Where is the subsidy saving?’ As a matter of fact, there wasn’t any line in the Federation Account with the description, ‘subsidy savings.’”

The Minister detailed how these savings materialized, pointing to increased collections by agencies like Customs. He explained that a dollar of import duty, which previously converted at approximately N460, now translates to N1,004, N1,003, or N1,005 due to the revised exchange rate. Similarly, revenue from Petroleum Profit Tax and the Nigerian Revenue Service (NRS) also saw higher naira values for the same dollar amounts. “So, the subsidy savings showed up in the form of higher collection by Customs because, for every one dollar of import duty before, at N460, it became one dollar at N1,004, N1,003, N1,005. The NRS, Petroleum Profit Tax that it collected before, same dollar, higher amount in naira. So, the savings showed up in the Federation accounts by way of higher revenue collections as a result of the reforms," Oyedele clarified.

Oyedele emphasized that the additional fiscal resources were not solely a product of the petrol subsidy removal. He highlighted that the foreign exchange reforms also played a crucial role by eliminating an "implicit subsidy" that had previously encouraged rent-seeking activities. “Not just the subsidy removal, but also the exchange rate flotation, because we were subsidising the exchange rate. And that subsidy was not going to the ordinary person or manufacturers. It was going to rent-seekers,” he concluded.