Nigeria’s government cautioned on Thursday that bringing back the petrol subsidy could lift pump prices to at least 2,000 naira per litre and weaken the naira to around 3,000 per U.S. dollar within months, as pressure builds for a reversal of the policy.
Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele made the remarks at a news briefing in Abuja on fuel prices. He said reinstating the subsidy would erode government revenue, risking a sovereign credit downgrade, higher borrowing costs, capital outflows and a drawdown of foreign exchange reserves.
Oyedele said such a sequence would also threaten recent gains on inflation that have allowed the central bank to begin cutting interest rates. He said it could cost Nigeria the rating upgrades it has recently earned, including its first from S&P in 14 years.
He argued that a subsidy does not cut the true cost of fuel but moves the burden from consumers to public finances. In his estimate, petrol sold under a subsidy would still cost more than Nigerians pay now.
Oyedele put the annual cost of restoring petrol to its pre-reform price at about 20 trillion naira. A proposal to sell petrol at 500 naira per litre would, he said, still require more than 16 trillion naira a year.
Petrol sold for about 830 naira per litre before the current global energy shock and now averages around 1,400 naira, he said.
The government said it remained open to other proposals but wanted backers of a subsidy to say what it would cost and how it could be funded sustainably.
Rather than a blanket subsidy, the government is negotiating a ceiling of 1,350 naira per litre on petrol’s ex-gantry or landing cost under a proposed price-modulation mechanism, officials said. They said the aim was to curb volatility and give targeted relief.
Calls to restore the subsidy have grown more than three years after President Bola Tinubu announced its removal. The Nigeria Labour Congress has given the government a two-week ultimatum on petrol prices and the minimum wage, according to local media.
