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(Ecofin Agency) – In May 2023, President Tinubu abolished Nigerian fuel subsidies, citing massive fraud benefiting neighboring countries. Since then, authorities have been considering measures to offset the impact of this removal.
Nigerian President Bola Tinubu has approved the establishment of an Infrastructure Support Fund (ISF) for all 36 states in the country. The announcement was made through a presidential statement on Thursday, July 20.
The fund is part of the government’s efforts to mitigate the effects of fuel subsidy removal. It will help states intervene and invest in critical areas such as transportation, agriculture, healthcare, education, electricity, and water resources. The objective is to utilize the savings generated to make long-term investments in key sectors and redistribute the benefits of subsidy removal across the population.
According to the executive, these initiatives will enhance “economic competitiveness, create jobs, and bring economic prosperity to Nigerians.” It has also been decided to save a portion of monthly distributable revenues to complement the ISF’s efforts. In June, out of 1.9 trillion naira of distributable revenues, only 907 billion will be distributed to the three levels of government, while 790 billion will be saved, and the remainder will be used for statutory deductions.
Upon assuming office, the Nigerian head of state implemented various economic, political, and monetary reforms, including the removal of fuel subsidies, which he believes “cost more than the allocated expenses for health and education.” Bretton Woods institutions praised this decision, although they recommend accompanying these removals with measures to protect the purchasing power of the most vulnerable populations.
In June, President Tinubu announced an increase in the national minimum wage to improve the overall living standards of the people, given the 22.79% monthly inflation rate. The World Bank estimates that Nigeria could save $15 billion by 2025 through fuel subsidy removal, with $2.8 billion saved this year alone.
Charlène N’dimon (intern)
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