Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has warned that a return to petrol subsidy could trigger capital flight, weaken investor confidence and push the naira to between ₦3,000 and ₦4,000 to the dollar.
Oyedele gave the warning on Monday during a press briefing at the International Monetary Fund and World Bank Annual Meetings in Bangkok, Thailand.
He said investors had repeatedly questioned whether the Federal Government would abandon its economic reforms ahead of the next election cycle.
The minister ruled out reversing the reforms, warning that even a signal that President Bola Tinubu’s administration was considering reinstating petrol subsidy could unsettle financial markets, increase borrowing costs and worsen economic pressures on households.
“In all the meetings I have had, I came to a conclusion that the markets, including the domestic market, which you can read from the capital market, and the international market, have largely written off the opposition in Nigeria as being unserious,” he said.
Oyedele warned that any indication of a possible return to subsidy would trigger an immediate market reaction.
“If, for any reason, the President were to say we are merely considering the return of fuel subsidy, capital would react immediately.
“Airfares would struggle, the naira would come under severe pressure, potentially moving towards 3,000, 3,500 or even 4,000. The very fuel people want subsidised would become far more expensive in naira terms,” he said.
The minister said capital flight could extend beyond foreign investors, as wealthy Nigerians, business owners and middle-class investors might also turn to the dollar as a hedge against uncertainty, further increasing demand for foreign exchange.
He warned that ordinary Nigerians would ultimately bear the consequences through higher import costs, rising prices and increased economic hardship.
Oyedele also rejected suggestions that the Nigerian National Petroleum Company Limited’s temporary reduction in petrol retail margins amounted to a return to subsidy.
He explained that the reduction was a commercial decision rather than a payment funded by public resources, arguing that a company’s decision to lower its profit margin to make a product more affordable should not automatically be classified as a subsidy.
President Tinubu announced the removal of petrol subsidy on May 29, 2023, during his inauguration at Eagle Square, Abuja.
“Subsidy is gone,” Tinubu declared shortly after being sworn in as Nigeria’s 16th president.
He said the national budget would make no provision for petrol subsidy from June 2023, marking a major shift in the country’s fuel pricing policy.
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