Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has warned that a return to petrol subsidy could trigger capital flight, weaken investor confidence and push the naira to between N3,000 and N4,000 to the dollar.
Oyedele gave the warning on Monday during a press briefing at the International Monetary Fund and World Bank Annual Meetings in Bangkok, Thailand.
He said investors had repeatedly questioned whether the Federal Government would abandon its economic reforms ahead of the next election cycle.
The minister ruled out reversing the reforms, warning that even a signal that President Bola Tinubu’s administration was considering reinstating petrol subsidy could unsettle financial markets, increase borrowing costs and worsen economic pressures on households.
“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,” he said.
Oyedele warned that any indication of a possible return to subsidy would trigger an immediate market reaction.
“If, for any reason, the President were to say we are merely considering the return of fuel subsidy, capital would react immediately.
“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,” he stated.
The minister added that capital flight could extend beyond foreign investors, as wealthy Nigerians, business owners and middle-class investors might also turn to the dollar as a hedge against uncertainty, further increasing demand for foreign exchange.
Oyedele also rejected suggestions that the Nigerian National Petroleum Company Limited’s temporary reduction in petrol retail margins amounted to a return to subsidy.
He explained that the reduction was a commercial decision rather than a payment funded by public resources, arguing that a company’s decision to lower its profit margin to make a product more affordable should not automatically be classified as a subsidy.
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