Nigeria’s Finance Minister, Taiwo Oyedele, has warned that a return to petrol subsidy could weaken the naira, trigger capital flight and push the exchange rate to between ₦3,000 and ₦4,000 per dollar.
Oyedele gave the warning on Monday during a press briefing at the International Monetary Fund (IMF) and World Bank Annual Meetings in Bangkok, Thailand.
According to the minister, investors remain concerned about whether the Federal Government will maintain its economic reforms as the next election cycle approaches. He, however, ruled out reversing the reforms, warning that any indication of a possible subsidy reinstatement could unsettle financial markets.
Oyedele Warns Against Petrol Subsidy Return
Oyedele explained that even a suggestion that President Bola Tinubu’s administration was considering a return to petrol subsidy could damage investor confidence.
He said such a move could increase borrowing costs, put pressure on the foreign exchange market and worsen the financial challenges facing Nigerian households.
The minister also said investors in both domestic and international markets were closely watching the government’s economic policy decisions.
He warned that a return to subsidy could trigger an immediate reaction in the financial markets.
“If, for any reason, the President were to say we are merely considering the return of fuel subsidy, capital would react immediately,” Oyedele said.
He added that the naira could come under severe pressure, potentially weakening to ₦3,000, ₦3,500 or even ₦4,000 per dollar.
According to him, a weaker naira would make imported goods more expensive and could increase the cost of petrol in local currency, undermining the intended benefits of subsidy payments.
Capital Flight Could Increase Pressure on Naira
The finance minister warned that the consequences of restoring petrol subsidy could extend beyond foreign investors.
He explained that wealthy Nigerians, business owners and middle-class investors could also move their funds into dollars to protect their assets against possible economic uncertainty.
Such a shift, he said, could increase demand for foreign exchange and place additional pressure on the naira.
Oyedele added that ordinary Nigerians could ultimately bear the burden through higher import costs, rising prices and increased living expenses.
His warning highlights the potential connection between government spending decisions, investor confidence and exchange-rate stability.
However, the projected exchange rate represents a warning about a possible scenario, not a confirmed forecast that the naira will reach those levels.
NNPC’s Petrol Margin Reduction Is Not a Subsidy – Minister
Oyedele also addressed concerns over the Nigerian National Petroleum Company Limited’s temporary reduction in petrol retail margins.
He clarified that the decision did not amount to a return to fuel subsidy because it was a commercial move rather than a payment funded by public resources.
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According to the minister, a company that reduces its profit margin to make a product more affordable is not automatically providing a government subsidy.
The distinction, he explained, lies in whether the price reduction is funded through public resources or absorbed as part of a company’s commercial decision.
Tinubu Announced Petrol Subsidy Removal in 2023
President Bola Tinubu announced the removal of petrol subsidy on May 29, 2023, during his inauguration at Eagle Square in Abuja.
Shortly after taking the oath of office as Nigeria’s 16th president, Tinubu declared, “Subsidy is gone.”
The announcement marked a major shift in Nigeria’s fuel pricing policy. The administration subsequently ended the previous arrangement under which the government supported petrol prices through subsidy payments.
Since then, changes in petrol prices, foreign exchange rates and the cost of living have remained important issues in the country’s economic debate.
Oyedele’s latest remarks reinforce the government’s position on maintaining its economic reforms, while warning that reversing the subsidy policy could introduce fresh pressures on the naira and the wider economy.
