…Says FX could weaken to ₦3,000/$1
By Emma Ujah, Abuja Bureau Chief
The Minister of Finance and Coordinating Minister of the Economy, Mr Taiwo Oyedele, has warned that a return to fuel subsidy could push the price of petrol to about ₦2,000 per litre and weaken the naira to as much as ₦3,000 to the dollar.
Oyedele gave the warning while briefing journalists on the ongoing debate over fuel subsidy in Abuja on Thursday.
He said the reintroduction of subsidy could reduce government revenue and place additional pressure on the country’s finances and foreign exchange market.
According to the minister, weaker government revenue could affect the country’s credit rating, increase borrowing costs and contribute to capital outflows.
He said the resulting pressure could also reduce foreign exchange reserves and weaken the naira.
Oyedele said, “Return subsidy and the sequence is familiar. Weaker revenue invites a sovereign credit downgrade, as the rating agencies have already signalled.
“That would put at risk the upgrades we have recently earned, including our first from S&P in fourteen years. Borrowing becomes costlier. Capital leaves. Reserves fall. The naira weakens.
“The progress on inflation, which has allowed the Central Bank to begin lowering interest rates, would be put at risk.
“Our estimate is that the exchange rate could approach ₦3,000 to the dollar within months, and so-called subsidised petrol would cost at least ₦2,000 a litre. That is well above what Nigerians pay today.”
The minister maintained that returning to a fuel subsidy regime was not an option, arguing that the government’s priority should be to strengthen revenue, stabilise the economy and protect recent gains.
Oyedele’s projections were presented as an estimate of the possible economic consequences of a return to fuel subsidy, rather than as a certainty.
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