Explainer: Where N15.8tn subsidy savings went

The Federal Government has detailed the distribution and expenditure of resources generated from the elimination of the petrol subsidy and foreign exchange reforms between June 2023 and December 2025.

As per the Nigeria Reform Scorecard presented by the Federal Ministry of Finance on Wednesday, these reforms resulted in N15.8 trillion in subsidy savings for the Federation during this timeframe.

However, it is important to note that the entire N15.8 trillion did not go to the Federal Government.

How was the N15.8 trillion allocated?
The ministry's report indicated that the N15.8 trillion was allocated among the three levels of government via the statutory allocation system.

The Federal Government received N5.4 trillion, which accounts for 34 percent of the total amount.

States were allocated N6.5 trillion, or 41 percent, while local governments received N3.9 trillion, representing 24 percent.

This indicates that the Federal Government's portion of the N15.8 trillion was N5.4 trillion, whereas N10.4 trillion was distributed to states and local governments.

Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele, clarified that the subsidy savings were not recorded in the Federation Account as a distinct item labeled "subsidy savings."

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

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

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

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

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

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

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.

Borrowing represented the largest portion, totaling N11.9tn or 58 percent. Savings from subsidies amounted to N5.4tn, which is 27 percent, while other revenue sources contributed N3.1tn, or 15 percent.

How was the money allocated?
The ministry reported that total incremental expenditures during the specified period reached N30.64tn.

The most significant expenditure was for wage adjustments, which totaled N9.39tn. This amount encompassed the minimum wage, wage awards, and allowances.

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

An additional N6.47tn was allocated for strategic infrastructure development.

The government also expended N3.14tn on the incremental costs associated with electricity subsidies, while N1.24tn was directed towards domestic debt service, influenced by increases in the monetary policy rate.

Other expenditures included N423.8bn for social welfare transfers, N419.1bn for the development of the Federal Capital Territory, the Ecological Fund, and investments in natural resources, along with N201.26bn attributed to higher naira costs of foreign obligations.

Where did the remaining funds originate?
The ministry's data indicates that the total incremental expenses of N30.64tn were not entirely financed by the N20.4tn in incremental resources.

Of the total expenditures, N20.404tn was sourced from incremental resources, while N10.236tn was derived from the existing revenue base.

In essence, the N5.4tn share of the subsidy savings by the Federal Government was part of a broader pool of N20.4tn in incremental resources utilized to finance various government expenditures.

What achievements does the government attribute to the reforms?
The ministry also provided a comparison between Nigeria's current economic status and the projected scenario had the reforms not been implemented.

It noted that the debt service-to-revenue ratio had decreased from approximately 100 percent in 2022 to an anticipated 50 percent in 2026, while the number of states unable to meet salary payments had declined from 27 in 2023 to none by 2026.

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

Nonetheless, it recognized that household welfare is still evolving, as poverty levels remain elevated and the cost of living has increased considerably after the reforms.

The government stated that its upcoming priorities involve curbing inflation, sustaining a consistent exchange rate, decreasing poverty, enhancing food security, and ensuring that macroeconomic improvements lead to improved living standards for Nigerians.