Fuel subsidy return could push Naira to N4,000/$, Oyedele warns

Says global, domestic markets have written off opposition, expects policy continuity

Experts warn of unmitigated disaster

MINISTER of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has warned that merely considering a return to petrol subsidy could trigger capital flight, undermine investor confidence and push the naira towards N3,000, N3,500 or even N4,000 to the dollar.

Oyedele, who ruled out reversing the government’s economic reforms, said any signal that President Bola Tinubu’s administration was contemplating reinstating the subsidy would immediately affect financial markets, raise borrowing costs and worsen economic pressures on households.

Speaking at the closing press briefing of the International Monetary Fund (IMF) and World Bank Annual Meetings in Bangkok, Thailand, the minister said investors had repeatedly questioned whether the government would abandon its reforms ahead of the next election cycle.

He said the domestic and international markets had largely discounted opposition parties’ proposals to restore the subsidy, while investors were pricing in the prospect of Tinubu securing a second term and continuing his economic policies.

“In all the meetings I have had, I came to a conclusion that the markets, including the domestic market, which you can read from the capital market, and the international market, have largely written off the opposition in Nigeria as being unserious,” Oyedele said.

He added that investors had not factored in a return to subsidy because they expected policy continuity.

According to the minister, a reversal would send a negative signal about the government’s commitment to reforms, potentially prompting investors to move their funds into foreign currencies and placing renewed pressure on the naira.

“If, for any reason, the President were to say we are merely considering the return of fuel subsidy, capital would react immediately,” he said.

“Airfares would struggle, the naira would come under severe pressure, potentially moving towards 3,000, 3,500 or even 4,000. The very fuel people want subsidised would become far more expensive in naira terms.” Oyedele warned that capital flight could extend beyond foreign investors, as wealthy Nigerians, business owners and middle-class investors might also seek refuge in dollars, further increasing demand for foreign exchange.

He said ordinary Nigerians would ultimately bear the consequences through higher import costs, rising prices and increased economic hardship.

The minister also rejected the description of the Nigerian National Petroleum Company Limited’s temporary reduction in petrol retail margins as a return to subsidy, explaining that it was a commercial decision rather than a payment funded by public resources.

He argued that a company reducing its profit margin to make a product more affordable should not automatically be regarded as receiving or providing a subsidy.

Oyedele maintained that Nigeria must sustain its reforms rather than reintroduce policies that could undermine recent macroeconomic gains.

Private investment hits $63 billion in three years

He disclosed that private investment had increased from about $300 million in 2023 to $6 billion in 2026, while the country’s net foreign reserves had risen from barely $3 billion to more than $45 billion.

The minister said the government’s next priority was to translate improved economic stability into stronger investment, lower financing costs, job creation and better opportunities for Nigerians.

Oyedele, however, insisted that the government would not return to fuel subsidies or multiple exchange rates, warning that any reversal could weaken investor confidence and expose the economy to fresh currency pressures.

Central Bank of Nigeria Governor Olayemi Cardoso, who also spoke at the briefing, stressed that policy consistency and transparency remained critical to attracting long-term capital and sustaining economic stability.

Meanwhile, economic and energy experts have warned that Nigeria could face severe fiscal and economic consequences if the Federal Government returns to petrol subsidy, citing risks of a weaker naira, higher petrol prices, rising borrowing costs and reduced funding for critical infrastructure.

The experts, including former Chairman of the Major Energies Marketers Association of Nigeria (MEMAN), Adetunji Oyebanji and Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, cautioned that reinstating the subsidy could worsen the country’s economic challenges rather than ease the hardship confronting Nigerians.

Oyebanji described a return to the subsidy regime as an “unmitigated disaster”, arguing that the financial burden could deepen the country’s fiscal difficulties.

“Are you aware that Nigeria’s debt service is now higher than our revenue? It will be an unmitigated disaster for Nigeria to return to subsidy,” Oyebanji said.

He warned that the hardship Nigerians currently experience could become significantly worse if the government reintroduced the policy.

“The hardship we are complaining about today will be like child’s play if we go back,” he said.

Providing an estimate of the potential fiscal implications, Yusuf also warned that restoring universal subsidy could expose Nigeria to an annual financial burden approaching N20 trillion.

Oyebanji recalled that the previous subsidy regime placed considerable pressure on government finances, contributing to difficulties in meeting public obligations, including salary payments by some state governments.

He urged the government to prioritise targeted assistance for vulnerable Nigerians through interventions covering transportation fares, school fees and other essential expenses rather than subsidising petrol consumption universally.

Oyebanji’s warning followed that of the Minister of Finance and Coordinating Minister of the Economy, Oyedele, who strongly cautioned that reinstating fuel subsidy could trigger a chain of economic consequences, including weaker government revenue, a possible sovereign credit-rating downgrade, higher borrowing costs and pressure on the foreign exchange market.

Speaking while briefing journalists in Abuja, the minister said returning to subsidy could reverse some of the gains recorded under the government’s economic reforms.

He explained that declining government revenue could weaken investor confidence, trigger capital outflows, reduce foreign exchange reserves and further depreciate the naira.

“Return subsidy and the sequence is familiar. Weaker revenue invites a sovereign credit downgrade, as the rating agencies have already signalled,” Oyedele said.

He projected that the exchange rate could approach N3,000 to the dollar within months if subsidy returned, while petrol could cost at least N2,000 per litre.

“Our estimate is that the exchange rate could approach N3,000 to the dollar within months, and so-called subsidised petrol would cost at least N2,000 a litre. That is well above what Nigerians pay today,” he said.

The minister’s projections represent possible consequences rather than a certainty that the exchange rate and petrol prices would reach those levels.

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Using an estimated petrol consumption benchmark of 50 million litres daily and an indicative subsidy requirement of N1,050 per litre, Yusuf, the CPPE chief executive, calculated that the policy could cost approximately N52.5bn daily, N1.575tn monthly and N19.16tn annually.

He noted that the actual cost would depend on crude oil prices, exchange rates, refining or import costs, consumption levels and the difference between market prices and subsidised pump prices.

Yusuf warned that such expenditure would compete with funding for infrastructure, education, healthcare, security, agriculture and social protection, while potentially widening the fiscal deficit and increasing borrowing requirements.

He added that higher government borrowing could crowd out private-sector credit, sustain high interest rates and weaken investment, productivity, job creation and economic growth.

Recall that before subsidy removal, Nigeria spent an estimated $10bn to $15bn annually on petroleum-product imports, placing significant pressure on foreign exchange liquidity and external reserves.

Despite opposing a return to universal subsidy, the experts acknowledged the need for urgent measures to cushion the impact of rising petrol prices on households and businesses.

The experts maintained that the policy priority should be to preserve petroleum sector reforms while addressing their social and economic costs through targeted relief, improved public services and investment in domestic production.

Yusuf advocated expanding affordable public transportation, improving electricity supply, strengthening food production and extending social protection to vulnerable households.

He also called for investment in alternative energy sources, including compressed natural gas and solar power, to reduce dependence on petrol and lower energy costs.

Oyebanji similarly urged the government to support vulnerable Nigerians through targeted interventions rather than blanket fuel subsidies.

Yusuf stressed that the additional revenues available to federal, state and local governments following subsidy removal must translate into tangible improvements in infrastructure, healthcare, education and public services.

He also called for greater transparency and accountability in the utilisation of the resources.