Subsidy return could push petrol to N2,000, dollar to N3,000 — FG

The Federal Government has warned that reintroducing petrol subsidies could lead to pump prices reaching N2,000 per litre and weaken the naira to around N3,000 per dollar in a matter of months. Finance Minister Taiwo Oyedele made these projections during a press briefing in Abuja on Thursday, discussing fuel prices and the ongoing debate regarding subsidies.

Oyedele stated that restoring subsidies would reduce government revenue, potentially result in a sovereign credit downgrade, increase borrowing costs, and trigger capital flight, ultimately weakening the naira and reversing recent inflation and interest rate reductions. He estimated that the exchange rate could drop to around N3,000 per dollar within months and that subsidized petrol would cost at least N2,000 per litre, a significant increase from current prices.

Oyedele argued that subsidies do not lower the actual cost of petrol but merely transfer the burden to government finances. He warned that financing subsidies could impact government spending and revenue collection. Despite calls for the return of subsidies, Oyedele emphasized that the government remains open to alternative proposals, provided they meet three criteria: cost, funding sustainability, and the resulting pump price.

Instead of returning to subsidies, the government is pursuing measures to mitigate the impact of higher petrol prices, such as a 30-day discount for petrol dispensed by the Nigerian National Petroleum Company Limited and negotiations for a N1,350 per litre ex-gantry ceiling on petrol landing costs.