Fuel subsidy would have cost N53trn, pushed naira to N3,500/$ if not removed, Adedeji says

The Chairman of the Nigeria Revenue Service (NRS), Zacch Adedeji, has said the fuel subsidy bill could have risen to about N53 trillion and the naira could have hit N3,500 per dollar if President Bola Tinubu had not removed the subsidy in 2023. He spoke on Channels Television on Sunday night while defending the removal decision and rejecting calls that the government should have built fiscal buffers first.

Adedeji's appearance followed a trending video of him assuring Tinubu that the economy has fared better under the current administration. He argued that critics of the government could not have done any better.

Subsidy was borrowing, not income

Adedeji said the subsidy was never a sustainable government expenditure. He described it as borrowing money to buy petrol at a higher price and selling it to consumers at a lower price.

“Subsidy is not an income. It is like you are using your borrowing money to buy a product and that product is 10 naira, and you are selling it at 3 naira,” he said.

He insisted that creating a buffer before removing the subsidy would not have solved the underlying fiscal problem because the government was already funding the subsidy through borrowed resources.

Potential burden could have reached N53trn

Adedeji said the scale of the subsidy burden would have become much larger because of global oil market developments and geopolitical tensions.

“The subsidy today would have been N53 trillion if Mr President has not removed it, given what is happening in Iran, given what is happening globally,” he said.

“With the ripple effects of that, the exchange rate today would have been around N3,500 if that had not been done,” he added.

He compared the potential subsidy cost with Nigeria's current budget, noting that the figure would have eaten up a substantial share of government spending. Retaining the subsidy, he said, would have left the government with an unsustainable fiscal obligation and limited resources for other parts of the economy.

Tinubu's decision a necessary intervention

Adedeji described the removal of the subsidy as a necessary intervention, not a policy error.

“It is not a mistake. It is the best thing that has happened to the economy,” he said.

He also defended the timing, saying Tinubu prioritised long-term economic sustainability over short-term political considerations. He said the President should be commended for making the choice despite its political consequences.

“We should commend Mr President for not being a politician or being preoccupied and forgetting whether I want to have an election or not, but focusing on having a solid foundation for this economy,” Adedeji said.

Subsidy removal and the fiscal debate

Tinubu removed the fuel subsidy on May 29, 2023, shortly after his inauguration. The move ended a system under which the government absorbed part of the cost of petrol to keep pump prices below market levels. It triggered a sharp increase in petrol prices and contributed to higher transportation and living costs.

Earlier this year, Tinubu said the removal saved Nigeria from imminent bankruptcy. Senator Solomon Adeola also said the country was saving over N10 trillion every year as a result.

However, advisory firm CFG Advisory has warned that the fiscal gains from subsidy removal have been fully absorbed by debt servicing. The firm said this leaves the Federal Government with little capacity to fund development projects or deliver meaningful social interventions. It added that redirecting subsidy savings to debt servicing has effectively neutralised the intended fiscal relief.

For the naira and Nigerian consumers, the debate remains open. The government says removal prevented a far worse exchange rate and budget crisis. Critics say the promised benefits have yet to show up in ordinary people's lives.