The Federal Government has hailed the removal of the petrol subsidy as a game-changer for state finances, claiming the policy has significantly increased resources for local governments to operate efficiently.
Speaking at the National Health Financing Dialogue in Abuja on Thursday, Coordinating Minister of Finance, Wale Edun, described the decision to scrap the Premium Motor Spirit (PMS) subsidy in May 2023 as “difficult but necessary.”
“Over the past two years, reforms have come at a cost as the Federal Government works to fix the economy.
“The subsidy removal was tough, yet it has restored confidence.
“States now have more than double the funds they previously had, enabling them to contribute meaningfully to critical sectors,” Edun said.
The policy shift sent fuel prices soaring past ₦1,000 per litre before recent adjustments brought it below ₦900.
Despite these fluctuations, inflation rates have shown a gradual decline, dropping to 21.88 per cent in July from 22.22 per cent in June, compared to a peak of around 27 per cent a year ago.
“Food inflation also eased to 22.74 per cent year-on-year in July, down from 39.53 the previous year.
Edun emphasised that the subsidy largely benefited a small segment of the population, including foreigners, at the expense of the broader economy, consuming roughly 2.5 per cent of Nigeria’s GDP.
“The cost of maintaining the subsidy meant there was insufficient funding for vital investments in healthcare, education, and other sectors. We are now slowly recouping these lost opportunities,” he noted.
The minister further stressed that ongoing reforms aim to foster a competitive economy, attract investments, and create sustainable growth across all sectors.
“The goal is to ensure every sector can thrive and that the economy becomes inclusive and resilient,” Edun added.