Petrol subsidy return could push dollar to N3,000 — FG

The Federal Government has warned that restoring petrol subsidy could push the exchange rate to N3,000 per dollar and raise petrol prices to at least N2,000 per litre within months.

Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, gave the warning on Thursday during a press briefing on fuel prices and the subsidy debate in Abuja.

Oyedele said bringing back the subsidy could reduce government revenue, trigger a sovereign credit downgrade, increase borrowing costs and drive capital out of the country.

He added that the resulting pressure on foreign exchange reserves could weaken the naira and reverse recent progress in reducing inflation and interest rates.

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

The minister argued that petrol subsidy does not reduce the actual cost of the product but merely shifts the financial burden to government, with consequences for public spending and the wider economy.

“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 warned that funding a subsidy regime could force the government to delay salaries and pension payments, increase taxes or resort to money creation, potentially worsening inflation.

“Over N30 trillion 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 acknowledged that restoring the subsidy could offer temporary relief to consumers but argued that the long-term economic consequences would outweigh the immediate benefits.

“Short-term relief, but with long-term fragility, is the most expensive money a government can spend,” he said.

The debate over petrol subsidy has intensified more than three years after President Bola Tinubu announced its removal in May 2023, with critics calling for measures to ease the impact of rising fuel prices on households and businesses.

Oyedele said the government remained open to alternative proposals but insisted that advocates must demonstrate how their plans would be funded and what pump prices they would deliver.

“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?” he said.

Rather than restore a blanket subsidy, the government is pursuing a series of measures to cushion the impact of high petrol prices.

These include a 30-day arrangement under which the Nigerian National Petroleum Company Limited will forgo its retail profit margin and sell petrol at cost, with public transport operators among the intended beneficiaries.

The government is also negotiating a N1,350-per-litre ceiling on petrol’s ex-gantry or landing cost, under a proposed price-modulation mechanism.

Other planned interventions include increased cash transfers to vulnerable households, subsidised credit, faster deployment of compressed natural gas vehicles and the establishment of a national strategic fuel reserve.

The government says the measures are intended to reduce price volatility and provide targeted relief without returning to a blanket petrol subsidy.