Today, at the 2025 NESG Macroeconomic Outlook, Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, revealed that the removal of fuel subsidies resulted in savings for the nation estimated to be around $20 million each day. This policy change, aimed at both demand and supply dynamics, has been highlighted as a crucial step towards stabilizing Nigeria’s economy. Mr. Taiwo Oyedele provided a comprehensive look at how this reform is not only easing demand pressures but also increasing supply, potentially reshaping the economic landscape of Nigeria.
Easing Demand Pressure
According to him, “The PMS subsidy removal, which has now been properly removed… for the first time we have the market structure to determine the price no longer the NNPC.” This shift from government-controlled pricing to market-driven dynamics, which led to an increase in PMS price, has drastically changed the consumption pattern of Premium Motor Spirit (PMS). Mr. Taiwo Oyedele narrated, “The demand or the consumption for PMS alone is down from around 70 million litres a day to around 40 million”. this reduction in consumption directly translates into a decrease in demand pressure on the supply for PMS, thereby reducing the need for foreign currency to import fuel, which in turn helps stabilize the naira and potentially curbs inflation.
Boosting Supply and Savings
The removal of the subsidies has not only cut down demand but has also led to a substantial saving in foreign currency. “That 30 million liters, whether it was fake consumption before or re-consumption has taken off an average of about $20 million in demand every single day from the Fuel subsidy market,” Mr. Taiwo Oyedele stated. This means that the 30 million litres decline in consumption, due to the removal if fuel subsidy saves Nigeria approximately $20 million a day, which he quantified further as over $7 billion a year. This saving is crucial when combined with other fiscal reforms, reducing the excess local demand on PMS and increasing the supply for potential exports. “So when you are removing pressure from the fuel subsidy market and the outlook is positive, production of crude oil is around 1.9 million barrels now,” he noted, indicating that with the reduction in demand for imported fuel, domestic production can catch up, potentially reaching 2 million barrels per day.
Economic Implications
The economic implications of these savings are multifaceted. Firstly, “Demand is coming down,” which according to Mr. Taiwo Oyedele, should lead to a stable naira. The need for foreign currency to pay for fuel imports directly impacts the exchange rate dynamics, potentially leading to a more stable and stronger local currency. Secondly, as the decrease in demand-induced inflation from fuel consumption is alleviated “inflation should be down” he noted. Lastly, Mr. Taiwo Oyedele is optimistic about productivity, stating, “Productivity should be up,” suggesting that the savings could be redirected into more productive sectors of the economy.
Long-term Outlook
Mr. Taiwo Oyedele’s comments reflect a broader strategic vision for Nigeria’s economic policy. “Overall, yeah, I remain positive based on data,” he said, reinforcing his belief in the reforms’ positive outcomes based on empirical evidence. While the removal of fuel subsidies initially causes immediate economic strain on citizens due to increased fuel prices, it is seen as a necessary step towards long-term economic health.
The strategic removal of fuel subsidies, as articulated by Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, signifies more than just fiscal policy adjustment; it’s a recalibration of Nigeria’s economic framework. By saving $20 million daily, the government not only reduces the demand pressure on foreign exchange but also sets the stage for increased supply, lower inflation, and potentially higher productivity. This reform, while challenging, is designed to foster a more robust and self-sustaining economic environment, illustrating a clear path from stabilization to prosperity.
