The Executive Chairman of the Nigeria Revenue Service (NRS), Zacch Adedeji, has revealed that Nigeria would have spent approximately N52 trillion on fuel subsidies by 2026. This amount represents 76% of the proposed N68 trillion budget for that year. However, the removal of the subsidy has averted this financial strain.
Adedeji shared this insight on Tuesday during the commissioning of the NRS headquarters in Abuja. He highlighted that eliminating the subsidy has significantly improved Nigeria’s fiscal health, marking a turning point for the country’s economic stability.
Key Highlights from the Chairman’s Remarks
Zacch Adedeji underscored the severe fiscal impact of maintaining the subsidy system.
“Mr. President, if that decision had not been taken, fuel subsidies alone would have consumed about 76% of the N68 trillion budget. At an estimated oil price of $120 per barrel, we were looking at subsidy costs exceeding N52 trillion. That would have left very little for capital projects, social services, and national development,” he explained.
He further noted that the reforms have bolstered Nigeria’s external reserves, which now stand at about $34 billion. This is a significant improvement compared to the projected $2 billion if the subsidy policy had continued. Additionally, the reforms have increased government revenue, improved state allocations, and enhanced fiscal transparency.
Background on the Subsidy Removal
President Bola Ahmed Tinubu announced the removal of the fuel subsidy during his inaugural address on May 29, 2023. This bold policy shift was aimed at alleviating the financial pressures on Nigeria’s economy.
“Fuel subsidy is gone,” Tinubu declared, signaling his administration’s commitment to economic reform.
The fuel subsidy, introduced in the 1970s, has long been a contentious issue. Despite being Africa’s largest oil producer, Nigeria imports most of its petroleum products due to insufficient refining capacity. The government sold these imported products at subsidized rates, keeping fuel prices low for consumers but placing a massive burden on public finances.
In 2022 alone, the subsidy cost the government N4.3 trillion. By the first half of 2023, an additional N3.36 trillion had already been allocated for subsidy payments. The removal of this policy has freed up resources for critical national development projects and reduced fiscal strain.
