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… He argues that the subsidy era had distorted fiscal stability and drained resources
…pushes for temporary, targeted interventions rather than blanket subsidies
Daud Olatunji
Finance Minister and Coordinating Minister for Economy, Wale Edun, has ruled out any possibility of returning to fuel or foreign exchange subsidies, warning that such a policy reversal would derail Nigeria’s fragile macroeconomic gains despite growing global economic pressures.
Edun said the federal government would instead support ongoing reforms, arguing that reintroducing broad subsidies would amount to a “regression” to policies that previously strained public finances and distorted the economy.
Speaking at a press conference following meetings of the Intergovernmental Group of 24 (G24) in Washington, DC, where he currently chairs the body, the minister noted that while higher crude oil prices may seem beneficial to oil-producing nations like Nigeria, the broader global energy crisis presents complex risks that cannot be ignored.
According to him, President Bola Tinubu’s administration has already begun to stabilize the economy through difficult but necessary reforms, including the elimination of oil subsidies and liberalization of the foreign exchange market.
Bola Tinubu had abolished oil subsidies and unified exchange rate windows at the start of his administration in 2023, policies that triggered immediate inflationary pressures but were widely described by economists as key steps towards fiscal stability.
Edun insisted that, despite current cost-of-living pressures, reversing such reforms would be counterproductive.
“It is important that there is not a return to generalized subsidies, a sort of relapse into policies that have not proven effective in the past,” he said.
He stressed that the government would instead prioritize targeted interventions aimed at protecting vulnerable citizens rather than large-scale subsidies that disproportionately benefit higher income groups.
Targeted support versus blanket grants
The minister argued that the current global shock – driven by geopolitical tensions, supply chain disruptions and energy market volatility – requires a more precise policy response.
Rather than dismantle the reforms, he said the government would expand temporary, targeted relief programs to protect the most vulnerable segments of society.
“We need to use targeted and temporary aid instead of slowing down the transformations that economies have undertaken,” Edun added.
He warned that while oil price increases can increase government revenues, the gains are often offset by rising costs of fertilizers, transportation, food and industrial inputs, which ultimately erode families’ real incomes.
“It’s not a one-way street,” he said, noting that rising energy costs also fuel inflationary pressures across all sectors of the economy.
Inflation risks and caution in monetary policy
Edun also urged caution on monetary tightening, warning that aggressive interest rate hikes by central banks could worsen economic vulnerabilities.
He said policymakers must find a balance between containing inflation and supporting economic recovery efforts.
“There is a critical balancing role here,” he noted, adding that premature tightening could stifle growth, while delayed action could allow inflation to take root.
Supporting his position, the director of the G24 secretariat, Iyabo Masha, said that supply-driven inflation – particularly that resulting from energy shocks – does not always respond effectively to interest rate increases.
He urged central banks to take a data-driven approach, warning against overreactions unless inflation begins to impact wages and demand overall.
“Unless these inflationary pressures spill over into wages, central banks should at least balance and wait and see how things develop,” he said.
Increasing debt service pressures on developing countries
The G24 also raised the alarm over the worsening external financing conditions facing developing economies, including Nigeria.
Edun revealed that many developing countries are now experiencing net financial outflows, as debt service obligations continue to exceed external inflows from aid and investment.
It revealed that developing economies paid about $163 billion in debt service in 2024, compared to just $47 billion combined in official development assistance and foreign direct investment inflows.
According to him, this imbalance is significantly limiting fiscal space for growth and poverty reduction programs in countries like Nigeria.
“We are in a period where developing countries are facing a net outflow,” he said, calling for greater support from multilateral institutions such as the International Monetary Fund (IMF) and the World Bank.
Despite external pressures, Edun argues that the long-term solution lies in strengthening domestic resource mobilization.
He called for accelerated tax reforms, improved revenue collection and broader fiscal discipline to reduce reliance on external borrowing.
He said such measures would help strengthen resilience against global shocks and ensure sustainable economic growth.
Reform or relapse dilemma
Analysts say the federal government now faces a delicate balancing act: supporting difficult reforms that have triggered short-term difficulties, while preventing economic hardship from turning into social unrest.
For Edun, however, the position remains firm: Nigeria cannot afford a return to the subsidy regimes that once drained public finances and distorted market signals.
As global uncertainties persist, the message from Nigeria’s economic managers remains clear: reforms must remain, even under pressure, while support for citizens must be more targeted rather than heavily subsidized.
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