The Federal Government has warned that returning to petrol subsidy could push the pump price of petrol to at least N2,000 per litre and weaken the naira to about N3,000 per dollar within months.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, gave the projection on Thursday during a press briefing on fuel prices and the subsidy debate in Abuja.
Oyedele said restoring subsidy would reduce government revenue, potentially trigger a sovereign credit downgrade, increase borrowing costs and lead to capital flight and a fall in foreign exchange reserves.
He said the resulting pressure could weaken the naira and reverse recent progress in inflation and interest-rate reductions.
“Borrowing becomes costlier, capital leaves, reserves fall, naira weakens. The progress on inflation, which has allowed the central bank to begin lowering interest rates, will be put at risk.
“Our estimate is that the exchange rate could approach ₦3,000 per dollar within months. And the so-called subsidised petrol will cost at least ₦2,000 per litre. This is well above what Nigerians pay today,” he said.
The minister argued that subsidy did not reduce the actual cost of petrol but only shifted the burden to government finances.
“A subsidy does not lower the cost of oil. It only changes how it is paid and when. Nigerians have paid that bill before in scarcity, in inflation, and in a collapsing currency,” Oyedele said.
He added that funding subsidy could also affect government spending and revenue collection.
“However, it is described, a subsidy must be financed through salaries and pensions not paid on time, through higher taxes, or through the printing of money, like we saw before this current administration. Over 30 trillion naira was printed. That’s inflation we’re dealing with. It wasn’t even just about the reform. Each of these has done great harm before,” he said.
Oyedele said returning to subsidy could provide temporary relief but create longer-term economic problems.
“Short-term relief, but with long-term fragility, is the most expensive money a government can spend,” he said.
The Federal Government has faced renewed calls for the return of petrol subsidy more than three years after President Bola Tinubu announced its removal.
Responding to proponents of a subsidy regime, Oyedele said the government was willing to consider alternative proposals if their financial implications could be demonstrated.
“We remain open to ideas, but any credible proposal should answer three questions. Number one, what will it cost? Number two, how will it be funded sustainably? Number three, what pump price will it deliver? We will engage in good faith with any proposer that shows its arithmetic,” he said.
Oyedele said the government was instead pursuing measures to cushion the impact of higher petrol prices, including a 30-day discount on petrol dispensed by the Nigerian National Petroleum Company Limited, with priority for public transporters.
He also announced that the government was negotiating a ceiling of N1,350 per litre on the ex-gantry or landing cost of petrol, while considering measures including increased cash transfers, subsidised credit, faster deployment of compressed natural gas vehicles and a national strategic fuel reserve.
