FG speaks on key danger of subsidy return

The Federal Government has warned that a return to petrol subsidy could push the price of petrol to at least N2,000 per litre and weaken the naira to about N3,000 to a dollar within months.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, gave the warning on Thursday during a press briefing on fuel prices and the subsidy debate in Abuja.

Oyedele said reinstating the subsidy would reduce government revenue and could trigger a sovereign credit downgrade, increase borrowing costs, cause capital flight and further deplete the country’s foreign exchange reserves.

He warned that the resulting economic pressure could weaken the naira and reverse recent gains recorded in inflation and interest-rate reductions.

The minister said, based on the government’s estimates, the exchange rate could approach N3,000 per dollar within months if the subsidy was restored, while the petrol supposedly sold at a subsidised price could cost at least N2,000 per litre.

He argued that a petrol subsidy does not reduce the actual cost of the commodity but merely transfers the burden from consumers to government finances.

Subsidy only shifts burden, says minister

Oyedele said Nigerians had previously borne the consequences of subsidy financing through fuel scarcity, higher inflation and currency depreciation.

He said subsidy funding could also force the government to delay salaries and pensions, increase taxes or resort to money creation, all of which could worsen economic pressures.

The minister said more than N30tn had previously been created through money printing, arguing that the consequences were still reflected in the country’s inflationary pressures.

He described subsidy as offering short-term relief while creating longer-term economic vulnerabilities for the country.

FG open to alternative proposals

The Federal Government has faced renewed calls for the restoration of petrol subsidy more than three years after President Bola Tinubu announced its removal.

Oyedele said the government remained open to alternative proposals but insisted that proponents must demonstrate the financial implications and sustainability of any proposed subsidy arrangement.

According to him, any credible proposal must show how much it would cost, how it would be sustainably funded and the pump price it would ultimately deliver.

He said the government was instead pursuing measures aimed at cushioning the impact of higher petrol prices on Nigerians.

These measures include a 30-day discount on petrol dispensed by the Nigerian National Petroleum Company Limited, with priority given to public transporters.

Oyedele also said the government was negotiating a ceiling of N1,350 per litre on the ex-gantry or landing cost of petrol.

Other measures under consideration include increased cash transfers, subsidised credit, faster deployment of compressed natural gas vehicles and the establishment of a national strategic fuel reserve.