The Federal Government has defended its decision to remove the petrol subsidy, warning that reinstating the policy could push fuel prices to at least ₦2,000 per litre and trigger renewed pressure on the naira and the wider economy.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, made the remarks on Thursday during a briefing in Abuja on fuel prices and the debate over subsidy payments.
Oyedele argued that bringing back the subsidy could reduce government revenue, increase borrowing costs and undermine recent improvements in Nigeria’s credit ratings. He also warned that capital flight, declining foreign reserves and further depreciation of the naira could follow.
According to the minister, the government estimates that the exchange rate could approach ₦3,000 to the dollar within months if the subsidy is restored. He claimed that under such circumstances, subsidised petrol could still cost at least ₦2,000 per litre, above the price Nigerians currently pay.
Oyedele maintained that the consequences of reinstating the subsidy would extend beyond the fuel market, potentially reversing progress in reducing inflation and complicating the Central Bank of Nigeria’s efforts to lower interest rates.
He also questioned how a renewed subsidy would be financed, arguing that the government would have to find the money through delayed salaries and pensions, higher taxes or increased money creation. He cited more than ₦30 trillion in previous money creation as a factor contributing to the inflationary pressures Nigeria continues to face.
The minister described subsidy payments as a temporary form of relief that could create more serious long-term economic problems if they were not supported by sustainable funding.
Calls for the return of fuel subsidies have continued since President Bola Tinubu’s administration announced the policy’s removal in 2023, with critics pointing to the rising cost of living and the impact of higher petrol prices on transport and household expenses.
Oyedele said the government was willing to consider alternative proposals but challenged those advocating a return to subsidies to explain the financial implications.
He said any credible proposal should clearly establish its total cost, identify a sustainable source of funding and specify the pump price it would deliver.
The government’s position is that any decision on fuel pricing must take account of its effects on public finances, inflation, the exchange rate and the broader economy, rather than focusing solely on short-term reductions at the pump.
