Edun: Fuel Subsidy Removal Doubled States’ Revenues, Boosting FAAC Allocations

The Federal Government on Thursday declared that revenues accruing to states have more than doubled since the removal of fuel subsidy in May 2023.

Coordinating Minister of Finance and the Economy, Wale Edun, made the disclosure at the National Health Financing Dialogue in Abuja. He admitted that the decision to withdraw subsidy was a tough but necessary reform to restore fiscal stability, stressing that the outcome has already begun to yield positive results.

According to Edun, monthly allocations shared by the Federation Account Allocation Committee (FAAC) have significantly increased in recent months. In June, states and local governments received ₦1.818 trillion, an improvement of over ₦1.3 trillion from earlier figures, while July allocations rose further to ₦2.001 trillion.

“The states now have more than double the money they had before,” Edun said, noting that the expanded revenue base gives governors the opportunity to strengthen contributions in healthcare, education, and other critical sectors.

The minister explained that subsidy payments previously consumed about 2.5 per cent of Nigeria’s Gross Domestic Product (GDP) and disproportionately benefitted a few individuals, including foreign beneficiaries. By ending the system, he said, the government has freed up resources for targeted investments that attract both private and philanthropic participation.

Edun also pointed to signs of macroeconomic relief, revealing that headline inflation declined slightly from 22.22 per cent in June to 21.88 per cent in July. Food inflation, which peaked at 39.53 per cent last year, has now eased to 22.74 per cent.

The Federal Government maintained that while subsidy removal has increased living costs in the short term, the long-term gains, particularly in higher state revenues, provide an opportunity to drive sustainable growth and improve service delivery at the subnational level.