The removal of fuel subsidies has been hailed as a pivotal decision to confront long-standing economic challenges.
This is according to Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms.
Speaking at The Platform, an annual event organized by Covenant Nation in Lagos, Oyedele outlined how previous subsidy regimes perpetuated economic distortions that gave Nigerians a false sense of financial stability.
Oyedele argued that while subsidies made fuel, electricity, and other essentials appear affordable, they masked the unsustainable fiscal realities underpinning the Nigerian economy.
“Removing subsidies is the best decision we made as a country. And we can now say that for once, the subsidy is gone,” Oyedele stated.
“We were living in window-dressed realities. If you look back to about two years ago, the naira exchange rate was N450 depending on who you asked. But was our exchange rate really N450? If you wanted to buy petrol, it was under N200 per litre, but was it really under N200 per litre?”
He criticized the pre-subsidy removal era, describing it as “window-dressed realities.” Oyedele explained that while fuel prices were officially under N200 per litre, the actual cost—factoring in government spending on subsidies—was much higher. Similarly, exchange rates and electricity tariffs did not reflect their true economic values, further exacerbating fiscal imbalances.
“A country can afford to sell petrol at N200 per litre if you can afford it. But there is everything wrong if you cannot afford it,” he remarked, likening the situation to a parent enrolling their child in a school they cannot sustain financially.
Economic Consequences
Oyedele highlighted that Nigeria’s financial dependence on debt to fund subsidies and other expenditures placed the country in a precarious position.
“Nigeria used all its revenue to service debts. We were not paying back our debts; we were just servicing them. Everything else we did, from paying salaries to fighting Boko Haram, we were just borrowing. When Nigeria borrowed, we borrowed at high digits, and those were the funds we were using to run the economy and service debts,” he said.
He warned that the outcome of these policies was predictable, comparing Nigeria’s trajectory to the economic crises experienced in Sri Lanka and Venezuela.
“In Sri Lanka, you would hold money and not be able to get fuel. There was a rule that you couldn’t drive your car every day of the week because there was no fuel,” Oyedele recounted.
GDP Growth and Fiscal Realities
Oyedele also debunked the notion of Nigeria’s economic strength, pointing out that the country’s real GDP growth over the past decade was less than 10%, effectively negative when adjusted for inflation.
“Our GDP growth rate was very low – over the past 10 years, less than 10%. If you do it in real-time, it is negative,” he explained.
He also noted that Nigeria’s reported GDP of $450 billion and per capita income of $2,000 were inflated perceptions that did not align with the actual fiscal realities.
The Role of Tax Reforms
Looking ahead, Oyedele emphasized the critical importance of tax reforms in stabilizing the Nigerian economy. He revealed that the Presidential Committee on Fiscal Policy and Tax Reforms is pushing for the approval of tax reform bills by 2025, with plans for phased implementation beginning in mid-2025.
“Our expectation is before the end of Q1, and therefore, we can give notice to taxpayers to prepare themselves with capacity and begin to implement around July 1,” he said.