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The finance minister says restoring petrol subsidy could weaken government revenue, trigger higher borrowing costs and reverse recent economic gains.
The Federal Government has warned that returning to a petrol subsidy regime could push pump prices to at least ₦2,000 per litre.
Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele, also projected that the naira could approach ₦3,000 to the dollar within months.
Oyedele made the projections on Thursday during a press briefing on petrol prices and the subsidy debate in Abuja.
He said the figures represented potential consequences of restoring subsidy rather than fixed government prices.
According to the minister, subsidy could reduce government revenue and put pressure on Nigeria’s fiscal position.
He said this could increase the risk of a sovereign credit downgrade.
A downgrade, Oyedele argued, could raise the cost of government borrowing and encourage capital outflows.
He added that falling foreign exchange reserves could then increase pressure on the naira.
“Our estimate is that the exchange rate could approach ₦3,000 per dollar within months,” Oyedele said.
He added that so-called subsidised petrol could cost at least ₦2,000 per litre under such conditions.
FG Rejects Return To Blanket Subsidy
Oyedele argued that a petrol subsidy would not reduce the underlying cost of petroleum.
Instead, he said it would shift part of the cost to government finances.
“A subsidy does not lower the cost of oil. It only changes how it is paid and when,” he said.
The minister also warned that subsidy financing could create pressure on public spending.
He said previous subsidy arrangements had contributed to fiscal strain, inflation and monetary expansion.
Oyedele argued that the government could eventually face difficult choices involving unpaid obligations, higher taxes or additional money creation.
He described subsidy-driven short-term relief as potentially creating longer-term economic vulnerabilities.
Government Announces 30-Day Petrol Discount
Despite rejecting a return to blanket subsidy, the Federal Government announced a temporary measure to ease petrol costs.
Oyedele said the government would offer a 30-day discount on petrol dispensed by the Nigerian National Petroleum Company Limited.
Public transport operators will receive priority under the arrangement.
The minister stressed that the measure does not represent a return to subsidy.
He described it as an arrangement through which the government would sell petrol at cost. (Channels Television)
The announcement comes amid renewed pressure over petrol prices and their impact on transportation and household costs.
FG Negotiates ₦1,350 Landing-Cost Ceiling
The government is also negotiating a ₦1,350-per-litre ceiling for the ex-gantry or landing cost of petrol.
Oyedele said the proposal forms part of a price-modulation mechanism designed to reduce sharp price movements.
The proposed ₦1,350 figure does not mean petrol will sell for ₦1,350 at filling stations.
Instead, the mechanism would seek to prevent changes in global crude prices or exchange rates from immediately producing similar changes at the pump.
Under the proposal, refiners and importers would initially absorb costs above the ceiling.
They would subsequently recover the difference when market conditions improve.
The government says the mechanism is neither a subsidy nor conventional price control.
Other Measures To Ease Petrol Price Pressure
The Federal Government also outlined additional measures aimed at reducing the impact of high energy costs.
They include increased cash transfers to vulnerable households and subsidised credit for small businesses.
The government also plans to accelerate the deployment of compressed natural gas vehicles.
The measure is intended to provide cheaper transport alternatives as petrol prices remain elevated.
The government is also considering forward crude sales to local refiners as domestic crude production increases.
Another proposed measure is a national strategic fuel reserve.
The reserve would provide additional protection against supply disruptions and market shocks.
The government is also considering measures to reduce transport costs linked to state levies and road-use charges.
FG Invites Alternative Subsidy Proposals
Oyedele said the government remains open to proposals for addressing high petrol prices.
However, he said proponents must demonstrate how their proposals would work financially.
He said any credible proposal must answer three questions: its total cost, how it would be funded sustainably and the pump price it would deliver.
The position comes amid renewed calls for alternative forms of petrol support more than three years after President Bola Tinubu announced the removal of the subsidy.
The presidency has also recently argued against returning to the previous subsidy model, while promoting cheaper energy alternatives such as CNG.
What The Government’s Warning Means
Oyedele’s ₦2,000 petrol and ₦3,000-to-the-dollar figures are projections based on a possible return to subsidy.
They are not current government-set petrol or exchange rates.
The immediate government response is instead focused on temporary discounts, price modulation and measures designed to reduce transportation and energy costs.
The proposed policies will determine whether consumers receive meaningful relief without recreating the fiscal pressures that the government associates with the former subsidy regime.
For Nigerians, the central issue remains the same: how to reduce the cost of transportation and household consumption while maintaining economic stability.
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