…Where Are the Savings from Subsidy Removal
By Tina Amanda
The Federal Government of Nigeria has announced plans to secure a $500 million loan from the World Bank to support basic education in the country. The loan is expected to receive formal approval by March 2025.
This move, however, has sparked widespread concern, particularly in light of Nigeria’s rising debt profile despite the removal of the fuel subsidy. Many Nigerians are now asking: Where are the savings from the subsidy removal?
Recent data from the National Bureau of Statistics (NBS) shows that Nigeria’s public debt, including both external and domestic debt, rose sharply to ₦121.67 trillion (US$91.46 billion) in the first quarter of 2024, up from ₦97.34 trillion (US$108.23 billion) in the previous quarter—representing a 24.99% growth rate.
Furthermore, the country has secured a total of $4.95 billion in loans from the World Bank under the administration of President Bola Tinubu, raising concerns over the mounting costs of external debt servicing.
Reacting to the development, a Lecturer with the Ignatius Ajuru University of Education Port Harcourt and an energy expert, Dr. Joseph Obele, condemned the act of excessive borrowing with no meaningful investment to productive sectors such as agriculture.
“President Tinubu, upon taking office, promised to reduce Nigeria’s dependence on borrowing for public expenditure and to lessen the debt service burden on the economy.
“He also assured Nigerians that funds saved from the removal of the fuel subsidy would be redirected toward critical investments in infrastructure, education, healthcare, and job creation. However, the government’s continued reliance on external loans has raised doubts about these promises.”
While borrowing is not inherently harmful to a nation’s economy, experts argue that Nigeria’s debt strategy is skewed toward consumption rather than production.
“In Nigeria, we borrow to cover excess expenditures, pay salaries, and service existing debt—this cycle is disastrous for the economy.”
Obele emphasized that nations should ideally borrow to invest in productive sectors such as agriculture, which could lead to job creation and food security.
“Borrowing to invest in production boosts economic output and income levels, Nigeria’s current borrowing model hampers future economic growth.
“The increasing burden of debt repayment, particularly in foreign currency, leaves less room for investments in sectors critical for economic development. Moreover, if the Nigerian currency depreciates further, the real value of interest payments will rise, placing even more pressure on the country’s finances.
“The situation is leading to a growing fiscal deficit, with the government needing to borrow more each year to cover the gap between revenue and expenditure. This trend could push Nigeria toward bankruptcy if not addressed.”
Dr. Obele called on the Federal Government to urgently cut down on expenses and reduce its dependence on borrowing, warning that the escalating debt crisis could severely damage Nigeria’s economy in the coming years.
As Nigerians await the official approval of the $500 million loan, questions continue to mount about the real impact of the fuel subsidy removal and whether the promised economic benefits will ever materialize.
