Fiscal Gains from Fuel Subsidy Removal Fully Absorbed by Debt, Says CFG Advisory
In a stark assessment of Nigeria’s fiscal health, CFG Advisory has warned that the economic benefits from the removal of the fuel subsidy have been entirely consumed by rising debt servicing costs. This leaves the Federal Government with minimal capacity to finance critical development projects or deliver impactful social interventions, a situation that significantly weakens the reform narrative. The firm presented this analysis at the monthly forum of the Finance Correspondents Association of Nigeria (FICAN), focusing on its 2026 economic outlook.
CFG Advisory’s Chief Executive Officer, Tilewa Adebajo, stated unequivocally that the redirection of subsidy savings has neutralized the intended fiscal relief. “The entire benefit of fuel subsidy removal is now being absorbed by debt service,” Adebajo said. He highlighted that Nigeria’s public debt, exceeding $100 billion, has reached unsustainable levels, placing severe strain on public finances. This fiscal pressure is exemplified in the proposed 2026 budget, where the N15.52 trillion allocation for debt servicing surpasses the combined N14.97 trillion earmarked for security, defence, education, and health. “When debt service alone is higher than what you spend on education, health and security combined, it is a clear signal of fiscal stress,” he noted.
The advisory firm cautioned that the economy is displaying classic signs of stagflation, with high costs, weak growth, and fragile confidence exacerbated by excessive fiscal spending and ineffective social programmes. Furthermore, CFG Advisory warned that Nigeria’s political calendar, much like discussions surrounding political transitions such as Fubara’s exit ‘self-inflicted’ scenarios elsewhere, could complicate economic management. Election cycles tend to weaken fiscal discipline, posing a risk that crucial reform momentum may slow precisely when it is most needed for stability and growth.
For sustainable recovery, the firm emphasized the necessity for stronger policy coordination across monetary, fiscal, trade, and industrial domains. It identified the persistent underfunding of capital expenditure—a key driver of growth—as a major structural weakness, as these budgets continue to be crowded out by recurrent spending and debt obligations. This scenario raises an alarm on fiscal sustainability not unlike concerns other groups express, such as when Afenifere raises alarm on national issues, highlighting systemic vulnerabilities that require urgent address.
