Petrol Subsidy Return Could Push Naira to N3,000/$, Pump Price to N2,000, FG Warns

The Federal Government has warned that restoring the petroleum subsidy could expose Nigeria to fresh economic challenges, including pressure on the naira and higher petrol prices. The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, gave the warning on Thursday during a briefing in Abuja on fuel prices and the ongoing debate over petrol subsidy.

Oyedele said the government was willing to consider alternative proposals but challenged advocates of subsidy restoration to explain how the policy would be financed and what pump price it would ultimately deliver.

Three Questions For Subsidy Advocates

“We remain open to ideas, but any credible proposer 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.

The minister said the government would engage with proposals backed by clear financial calculations, stressing that the issue could not be addressed without considering its wider impact on public finances.

According to Oyedele, reinstating the subsidy could weaken government revenues and potentially affect Nigeria’s credit standing.

“Return subsidy, and the sequence is familiar. Weaker revenues invite a sovereign credit downgrade,” he said.

Naira, Inflation And Borrowing Costs

He added that higher borrowing costs, capital outflows and falling foreign reserves could follow, while the naira could come under additional pressure. Oyedele also warned that progress made in reducing inflation could be threatened if the subsidy were restored, potentially affecting the monetary policy environment.

“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,” he said.

The minister argued that such a development would ultimately leave Nigerians paying more for petrol than they currently do, despite the subsidy.

NNPCL Discount, Not Subsidy

Meanwhile, the Federal Government has announced a temporary discount on petrol sold by the Nigerian National Petroleum Company Limited (NNPCL). Oyedele said the discount would initially run for 30 days, with public transport operators given priority.

“We are offering a discount on petrol dispensed by NNPC Limited for the next 30 days in the first instance with priority for public transporters nationwide. So, it’s not a subsidy, the government is just saying we sell to you at cost,” he said.

The warning matters for the naira and Nigerian businesses because a return to subsidy would strain public finances, raise borrowing costs and put new pressure on the exchange rate, according to the government’s estimate. For consumers, the minister said the policy could still deliver a pump price of at least N2,000 per litre.